www.businessmonitor.

com

2010

the RUSSIA oil & gas competitive intelligence report

“Well Positioned for Global Recovery”

published by Business monitor international ltd.

RUSSIA OIL AND GAS COMPETITIVE INTELLIGENCE REPORT 2010
Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International Publication Date: October 2010

Business Monitor International Mermaid House, 2 Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com

© 2010 Business Monitor International. All rights reserved. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher.

DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.

Russia Oil and Gas Competitive Intelligence Report 2010

© Business Monitor International Ltd

Page 2

........................................................................................................................................................................................................................................ 33 Latest Developments ................................................................................................ 54 © Business Monitor International Ltd Page 3 ...................................................................................................................................................................................................................................................................................................................................... 22 Latest Developments ............................................................................................................................................... 53 Market Position ................................................................. 30 Latest Developments ......................................................................................................................................... 38 TNK-BP ........................................................................... 19 Key Downstream Players..................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 37 Strategy .......................................................................................................................... 48 Latest Developments ............................................................................................................................................................................................................................................................................................................................................................................................................ 50 Market Position ...................................................................................................................................................................... 22 Strategy .................................................................................................................................................................... 14 Oil Transit ......................................... 46 Total................................................................................................................. 18 Table: Key Upstream Players ............................................................................................................................................................................................................... 48 Novatek ................................................................................................................. 24 Gazprom Neft (formerly Sibneft) ................................................................................................................................................................................................................................................................ 50 Strategy ....................................................................... 7 Government Policy ......................................................... 9 International Energy Relations ................................................................................... 51 Latest Developments .......................................................................................................................................................................................................................................................................................................................................................................................................................................... 33 Lukoil ....................................................................................................................................................................................................................................................... 20 Company Profiles ...................................... 47 Strategy ............................................. 36 Market Position ................ 45 Market Position ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 46 Latest Developments ............. 41 Strategy .................................................................................................................................................................................................................................................................................................................. 37 Latest Developments .................................................................................................................................... 10 Gas Transit ................................................................................................................................................................................................................ 41 Latest Developments ............................................................................................................................................................................................................................................................................................................................................ 40 Market Position .................................. 42 Tatneft .............................................................................................................................................................................................................................................................. 21 Gazprom .................. 29 Market Position .............................Russia Oil and Gas Competitive Intelligence Report 2010 CONTENTS Competitive Landscape Analysis ........................................................................................................................................................................................................................... 32 Strategy ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 53 Strategy ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................ 54 Recent Developments ................................................................................................................................................................................................. 5 Table: Key Domestic And Foreign Companies In The Russian Oil And Gas Sector ............................................................................................................................................................................................................................................................... 51 Russneft................................................................................................................................................................................................................................................................................................................................................ 47 Market Position ............................................................. 21 Market Position ................... 7 Licensing And Regulation ............................................................................................................................................................................ 31 Rosneft ................................. 46 Strategy ...................................... 6 Overview/State Role................................................................................................................................................................................................................................................................................................ 32 Market Position .................................... 30 Strategy .........................................................................................................................................................................................................................................

...... 78 Business Environment Ratings ................................. 61 Alliance Oil – Summary ......... 74 SWOT Analysis ...................................................................................................................................................................................................................................................................Russia Oil and Gas Competitive Intelligence Report 2010 Surgutneftegaz – Summary................................................................................................................................................................. 81 Russia Upstream Rating -........................................ 77 Risk-Reward Ratings .................................................................................................................................................................................. 59 BP – Summary .......................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 60 Irkutsk Oil Company – Summary .....................................................Potential Returns ................. 79 Upstream Scores ...... 84 © Business Monitor International Ltd Page 4 ........................................................................................................................................................................................................................................................... 82 Russia Downstream Rating -................................................................. 61 PetroNeft – Summary .................................................................................................................................................................................................................................................................................................000b/d Capacity Or Greater In Russia ......................................................................................................................... 56 Sistema – Summary ...................................................................................................................................... 58 Wintershall – Summary ........................................................................................................................ 80 Russia Upstream Rating -................................................................................................................................ 81 Downstream Scores ..................................................Overview ..............................Potential Returns............................................................................................................................................................................. 78 Table: Regional Composite Business Environment Rating ................................................................ 67 Oil Refineries ............... 81 Russia Upstream Rating -.................................................................................................................................................................................................................................................................................................................. 64 Russia Energy Market Overview .............................................................................................................. 70 LNG Terminals .................................. 60 Aladdin Oil & Gas – Summary .............................................................................................................................................................................Risks To Potential Returns ...........................................................................Risks To Potential Returns ................ 82 Table: Regional Downstream Business Environment Rating .......................................................................................................................................................................................................................................................................................................................................................................................................................................... 70 Oil Pipelines . 62 Others – Summary .............................................................................................................................................. 60 OMV – Summary..................................................................................................... 69 Oil Terminals/Ports ............................................................................................................................................................................................................................................ 67 Table: Refineries Of 50................................................................................................................................................................................. 83 Russia Downstream Rating -...............................................................................................................................................................................Overview .................................................................................................................................................................................................................................................................................. 59 Lundin Petroleum – Summary....... 57 Transneft – Summary .................................................................................................................. 83 Russia Downstream Rating -.......................................................................................................... 72 Gas Pipelines ..................... 58 Sakhalin Energy – Summary .......................................................................................................... 57 Royal Dutch Shell – Summary......................................................................................................................................................................................................................................................... 57 ExxonMobil – Summary .......................................................................................................... 62 Market Attractiveness Analysis .......................................................................................................... 80 Table: Regional Upstream Business Environment Rating................................................................................................................................................................................................................................................................................................... 77 Russia Business Environment SWOT .. 83 Business Development Directory ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................. 78 Composite Scores........................ 78 Central/Eastern Europe Region ........................................................................................................................................................................................................................................................................................................................................................................................................ 64 Oil & Gas Infrastructure .................................................................................................................................................................................................................................................................................................................................................... 56 Itera – Summary .......................................

815 service stations in Russia. such as Russneft and Urals Energy. • BP has shares in the TNK-BP venture. Up to 24. are not too far behind. BP is boosting its Russian focus following the Macondo spill. They are now. In 2009.000b/d Kirishi oil refinery and around 300 service stations in north-western Russia. following the acquisition of Yukos’ assets in 2007-2009. The company first denied any Lukoil divestment and then said only 10% will be sold. but privately owned Surgutneftegaz. TNK-BP and large regional producers such as Tatneft and Bashneft. On July 26.83mn b/d. • Surgutneftegaz’s 2008 crude production was 1. the lowest level in history. State-run Rosneft is the main producer. • The Russian government has moved forward its plans to privatise a larger share of Rosneft. first announced in October 2009. after the company's investment in Lukoil failed to meet expectations. Gazprom produced 462bcm.Russia Oil and Gas Competitive Intelligence Report 2010 Competitive Landscape Analysis • The Russian gas industry is dominated by Gazprom. Sibir Energy. The decision fits ConocoPhillips' stated asset divestment plan. which is the main IOC interest. the Finance Ministry included the country's largest oil producer in the list of nine companies earmarked for partial privatisation in 2011-2013. The group has an estimated 18% share of refining capacity and 1. one of the largest independent producers. • Lukoil’s oil output in January-September 20009 totalled around 1. © Business Monitor International Ltd Page 5 . but overall inter-company competition is more limited than it would initially appear.1bcm. Royal Dutch Shell and BP are members of consortia developing the Sakhalin fields.24mn b/d. Lukoil. however. threatened by takeovers from the state-run majors owing to debt over-exposure. • The oil sector is more diversified. leaving the state with the 51% controlling stake. Downstream assets include the 400. The degree of private companies’ connections with the Kremlin varies. which is effectively a downstream gas monopoly that also accounts for around 84% of upstream production.16% of Rosneft could be sold. ExxonMobil. often in non-oil-related activities. have been fashioned by high-profile businessmen in the wake of the state asset sell-off in the 1990s. • Many leading domestic independents. Gazprom’s oil arm Gazprom Neft is now a major producer. • US major ConocoPhillips is selling its entire 20%Lukoil stake. while gas output totalled 14. was taken over by Gazprom Neft in mid-2009.

*2008 figures © Business Monitor International Ltd Page 6 . 12.2% state 36% Tatarstan govt 75% Basel e = estimate.7* 34. 2.5* % share of total sales na na na na na na na 30e No.Russia Oil and Gas Competitive Intelligence Report 2010 Table: Key Domestic And Foreign Companies In The Russian Oil And Gas Sector Company Gazprom Lukoil TNK-BP Surgutneftegaz Gazprom Neft Rosneft Tatneft Russneft 2009 Sales (US$bn) 116.093 na 8.000 na Year established 1992 1991 2003 1993 1995 1993 1955 na Total Assets (US$mn) na 59. Alekperov.0* 24.5 4.1* 107.000 90.342 59. 50:50 BP.8 7. BMI.837 na na Ownership (%) 91. of employees 445.06% Other mngt. na = not available/applicable. Source: Company data 2009.632 11.6% V.300 86.ON Ruhrgas 20.1% state. ARR Employee-owned 100% Gazprom 75.7 18.000 104.5% E.000 150.2 46.108 55.000 74.

The government currently plans to end the duty in 2011. The oil export duty for fields elsewhere in Russia increased by 17% in December 2009 to US$271/tonne. distribution. Following US major ConocoPhillips’ divestment of its 20% stake in Lukoil in 2010. Verknechonsk and Talakan. First. plus privately owned Lukoil. Restructuring has been discussed for years with little progress. BP is the only foreign palyer with a large interest in Russian oil producers through the TNK-BP JV. According to anonymous government and industry sources cited by Vedomosti in March 2010. which dominates production and holds a monopoly on exports and. the export duty holiday on the main East Siberian oil fields will remain in place in 2010 but may be revoked in 2011. Rosneft said in November 2009 that it expects the tax holiday for East Siberian fields. in practice. while tax exemptions for producers in the Sea of Okhotsk in the Far East would be granted for up to 15 years or until 30mn tonnes (220mn bbl) of oil have been produced. © Business Monitor International Ltd Page 7 . Surgutneftegaz. According to Vedomosti's sources. with the increase in the gas MET having been set at 61%. from the beginning of 2011. the tax exemptions for Black Sea production have been granted for up to 15 years or until 20mn tonnes (146. Surgutneftegaz and TNK-BP. although domestic gas prices are being very gradually adjusted to international levels. The MET rate is currently RUB419/tonne. Second. the gas trunklines by Gazprom. Russia intends to increase the mineral extraction tax (MET) for both oil and gas production. The biggest crude producers. although the main Russian producers are increasingly venturing abroad directly. Russia has proposed increasing the tax on refined products exports. The proposed MET increases will be inflation-adjusted. the Kremlin scrapped export duty on 13 main East Siberian projects and all projects in the Black and Okhotsk seas. namely Rosneft. a process that started in the mid 2000s. Licensing And Regulation There are three proposed changes to Russia's tax structure. which includes Vankor. Meanwhile. The oil pipeline system is managed by staterun Transneft.10/bbl. bringing significant savings to the industry.Russia Oil and Gas Competitive Intelligence Report 2010 Overview/State Role The oil sector is concentrated in the hands of several domestic companies. TNK-BP and Tatneft. to last until 2013-2015. equivalent to US$37. Foreign upstream oil ventures traditionally have been carried out through the Zarubezhneft state vehicle. over US$2bn in total. by an amount equivalent to 60% of the crude export duty. On December 1 2009.7mn bbl) of oil have been produced. adjusted according to the price of Urals crude. There were plans to merge Gazprom with Rosneft. but the deal was abandoned. exporters and refiners are state-run Rosneft and Gazprom Neft. with limited direct IOC involvement. Gas activities are controlled by national giant Gazprom. The third and final measure being considered is an increase in the gasoline excise tax by RUB1 per litre over the period 2011-2013. the field depletion rate. the re-introduction of export duties on East Siberian crude would cost the major producers in the region. and the US$/RUB exchange rate.

are unlikely. Any lasting fiscal concessions.Russia Oil and Gas Competitive Intelligence Report 2010 While the policy shift would reduce the profitability of the fields. It was estimated that the government would yield an additional RUB60bn (RUB53bn via export tax and RUB7bn via extraction tax) through the suggested tax increases. development and lifting costs but fails to encourage new developments. Prime Minister Vladimir Putin said he would consider Alekperov's request and in July 2010 Lukoil said that it had reached a preliminary agreement with the finance ministry to halve export duties on North Caspian oil. If it does not reform its tax framework. which occurred despite a 30% increase in upstream capex. the shallow waters in the North Caspian do not present the same logistical and technological challenges as the remote East Siberian deposits. increased the tax-free MET threshold from US$9/bbl to US$15/bbl. Lukoil's president. its own projections show production falling to 9mn b/d by 2013. has also been calling for an export tax holiday for offshore fields. According to the country’s Finance Minister Alexei Kudrin. the country could increase production to a sustainable 10. First.2mn b/d by 2013. At the Yuriy Korchagin opening ceremony. the first annual decline in eight years. however. The ministry estimates that if Russia implements the new fiscal measures. it is unlikely to have an impact on the progress of East Siberian upstream developments in the short term.6) per thousand cubic metres (mcm) to RUB162/mcm and to increase the gas export duty from 30% to 35%. The structure of the tax regime was partly responsible for the fall in the country's oil production in 2008. the Russian government reduced MET to encourage the reinvestment of corporate profits into E&P. most of which would be paid by Gazprom. Lukoil. Vagit Alekperov. with the tax burden exceeding 68% of their gross revenue. which would stand to be the main beneficiary of any further tax breaks. On January 1 2009. does not enjoy the same influence in the Kremlin as its state-connected rivals Rosneft and Surgutneftegaz. However. this would allow oil producers to save over US$4bn annually. the MET and export duties account for about 95% of oil producers’ tax payments. Russia has exempted the first 730mn bbl of oil produced in the region from mineral extraction tax. In July 2009 the Russian government announced that it would not increase gas production and export taxes as had been earlier suggested by the Finance Ministry. According to the Ministry of Natural Resources and Environment (MNRE). however. To stimulate projects in the Caspian Sea. Third. both of which are big East Siberian players. the Russian finance ministry is strongly opposed to any further loss of state revenue through concessions to oil companies. The amendment to the tax code. The Finance Ministry had therefore proposed to increase the tax on gas production from RUB147 (US$4. Russia has been assessing ways to source extra cash to offset declining revenues in the recession. Second. the fiscal incentive currently enjoyed by operators in East Siberia. © Business Monitor International Ltd Page 8 . Such a revenue-based system is effective for rent collection and works well for mature projects with low finding. agreed in May 2008.

However. offshore fields in Russia can only be developed by companies in which the government owns a stake of 50% or greater.9bn at 2010 rates) in E&P offshore Russia in 2008. Putin has responded to Gazprom's proposal saying that as the introduction of import tariffs were 'not just an economic question'. the government wants an annual investment of US$28. Gas production goals look extremely ambitious outright given the current volumes and dynamics of the global supply and demand. This time.4bn (late 2009 exchange rate) in the oil sector and US$27bn in the gas sector. In the Moscow Times article Donskoy claimed that the NREM believes Gazprom and Rosneft have insufficient resources to develop Russia's continental shelf on their own. It is arguable that this has damaged Russian investment in offshore areas. The oil output target is theoretically achievable. companies applying to work on the fields must have a five-year record of working on such projects. The two companies invested only RUR56. The level of capex outlined in the plan. Gazprom has successfully managed to fend off attempts by the Finance Ministry to increase its tax burden by arguing that it already faces extremely high new-generation E&P costs. Exports of crude and oil products are expected to rise to 6.Russia Oil and Gas Competitive Intelligence Report 2010 In the past.6-10. effectively limiting participation to Gazprom and Rosneft. an import tariff should be introduced. Government Policy Under the Energy Strategy 2030. is unlikely to be sufficient.7mn b/d of oil and 885-940bcm of gas by 2030. In addition. Under legislation passed in 2008. Russia is expecting to sustain its oil output at roughly 2009 levels and dramatically boost gas production. Most of the extra gas exports are expected to be absorbed by Asia. Under a plan drafted by the ministry. according to a report by the Moscow Times newspaper in March 2010. especially after a downward revision of the August 2009 draft.4bn (US$1. however. the government would look into the issue at a later stage. said the proposal would allow subsidiaries of the two companies to join them in offshore exploration and could lead to IOCs also becoming involved. The report. the companies would be allowed to share access with their subsidiaries and could farm out a stake of up to 50% in offshore projects to foreign companies. Taxing the gas that Gazprom purchases from Central Asia (and resells to Europe) would likely cost the company less as the volumes it buys from abroad are significantly lower than its domestic output. which cited deputy energy minister Sergei Donskoy. The plan. drafted in August and approved in November 2009. To achieve the set output growth. Offshore Exploration Russia may relax rules effectively limiting offshore E&P in the country to Rosneft and Gazprom. the newspaper also reported that it is unclear whether the proposal has been submitted to the Russian cabinet.6mn b/d while gas sales abroad are to reach 349-368bcm by that year. calls for annual production of 10. © Business Monitor International Ltd Page 9 . The proposal would also allow any of the subsidiaries to develop offshore fields on their own or in partnership with other companies. Gazprom has suggested that rather than increasing tax on production and exports. a rate that Donskoy claimed would mean ministry targets for offshore areas would take 165 years to fulfil.

or half the overall divestment target. The ruling is the most explicit recent step in the Kremlin’s programme of consolidating control over Russia’s mineral resources and suggests further downside risks to an investment climate already marred by a poor licensing. Up to 24. although government officials have been given conflicting signals. and other ‘strategic’ industries. can list abroad. Each of the major companies is therefore also adopting its own strategies to minimise the negative repercussions of the economic downturn. Russia's main producers collectively approached the Kremlin for assistance. Although these moves will be supportive.Russia Oil and Gas Competitive Intelligence Report 2010 The government is moving forward plans to privatise a larger share of Rosneft. The head of the FFMS said at the time that the companies’ shares can. Moreover. only 5% of the energy companies’ total sales are allowed to come from operations in foreign countries. As the jewel in the Russian state sector's crown. the Finance Ministry included the country's largest oil producer in the list of nine companies earmarked for partial privatisation in 2011-2013 in an attempt to eliminate the budget deficit. This will push Russian companies to raise finance at home. the MoU will look at ways of supplying South Korea with gas from the Sakhalin projects. under the terms of a previous © Business Monitor International Ltd Page 10 . The companies also requested Putin to order the finance ministry and the central bank to work out a mechanism of financing strategic projects with the help of 'state targeted credits'. privatisation and regulatory structure. TNK-BP and Rosneft plus Gazprom’s Deputy Chairman Alexander Ananenkov wrote to Prime Minister Vladimir Putin asking for state credit ‘to pay for foreign debts’. In July 2010. and therefore must. In particular. the Rosneft stake could provide around RUB500bn (US$16. In July 2008.16% of Rosneft could be sold. the Federal Financial Markets Service (FFMS). Russia’s state market regulator. The government has signalled its intention to provide US$50bn from Russia's gold and foreign exchange reserves to help refinance domestic corporations' foreign debt and grant selected tax holidays. they may not be enough on their own to help Russia's major oil producers ride out the current crisis. The CEOs of Lukoil. they argued that the overall debt volume of the Russian energy sector was around US$80bn and required state action. Although the companies did not specify the required sum. International Energy Relations South Korea Gazprom and its South Korean counterpart Kogas signed an MoU in June 2009 to jointly study the options for delivering Russian gas to South Korea. adding that all the necessary conditions to enable that process were in place. A non-controlling stake in Transneft may also be sold. According to Platts.5bn) for the treasury. As the extent of the global economic meltdown became clear in September 2008. leaving the state with the 51% controlling stake. in line with President Dmitry Medvedev’s plans to turn Moscow into a major financial centre by 2020. be traded in roubles in Russia. put a 25% cap on the proportion of shares domestic mineral resources companies. under the new rules.

Rosneft and Transneft will spend the Chinese loans in two main areas: ESPO and 'corporate development'. According to an official in the Russian energy ministry. China In February 2009. A high-level official quoted by Reuters reported that the interest rates of the loans will be pegged to LIBOR and will fluctuate between 5% and 5. However.2bcm (1. claiming that the shallowness and uneven surface of the seabed in the area makes the project highly challenging from a technical perspective. The first two concern long-term loans to be provided by the China Development Bank to Rosneft. Kogas began receiving Russian LNG under a 2. In April 2010 Gazprom’s head of foreign projects. and the fourth is an agreement between CNPC and Transneft regarding the construction and exploitation of the China-bound branch of the East Siberia-Pacific Ocean (ESPO) pipeline. following a marked deterioration in relations between the two Koreas in mid-2010.6mn tpa) supply contract. and oil pipeline monopoly Transneft. Longer term.Russia Oil and Gas Competitive Intelligence Report 2010 agreement signed by Kogas and Gazprom in September 2008. The first option suffers from severe geopolitical risks while the second option presents partners with formidable technological and financial challenges. which is likely to imply debt management. Tsyganov also poured cold water on the subsea route plans. the Korean company plans to import 10bcm per annum of Russian gas between 2015 and 2045. © Business Monitor International Ltd Page 11 . The numerous difficulties with both pipeline options suggest to us that no concrete decision will be reached during this round of talks. The agreement was made up of four deals. Kogas. it is unclear what route the gas interconnector could now take. the price of the oil supplied will be calibrated monthly.5%. According to Russian energy minister Sergei Shmatko. Moscow and Beijing signed a major energy agreement that will see the Russian state oil sector receive US$25bn in Chinese loans in return for a commitment to sell China 15mn tpa of crude (300. said that South Korea and Russia were expected to begin a new round of talks in mid-April on a gas interconnector between the countries. Additionally. The third is a 20-year oil supply contract between China National Petroleum Corporation (CNPC) and Rosneft. Following the launch of the Gazprom-led Sakhalin-II project in April 2009. Although the financial terms of the deals were withheld. we believe the pipeline will not be built until the political unification of the Korean peninsula. which will receive US$15bn. Stanislav Tsyganov. based on the Platts and Argus trade quotes for the Kozmino terminal. two unnamed Russian government sources unofficially provided details. quoted by Vedomosti. which will receive US$10bn.000b/d) between 2011 and 2030. is now looking to boost these Russian gas imports significantly by expanding the regional LNG export capacity and/or ensuring the extension of the planned Sakhalin-Khabarovsk-Vladivostok gas pipeline into the Korean peninsula. An MoU on jointly constructing an LNG terminal on Russia’s Pacific coast was signed by Gazprom and Kogas in September 2009. one of the world’s largest gas buyers. two pipeline options between Russia and South Korea are currently being evaluated: the overland pipeline via North Korea and the direct undersea pipeline.

The resolution of the dispute will boost efforts to develop the oil and gas resources of the Barents Sea. Qatar's discussion of gas cooperation with Russia will sound worrying to European gas consumers. Russia announced that it would increase gas prices. According to Gazprom. © Business Monitor International Ltd Page 12 . the two sides discussed potential cooperation in LNG transactions and swap deals between LNG and pipeline gas in the European and Asia-Pacific markets.000sq km in the centre of the sea. prompting Belarus to introduce an oil transit fee that led to Russia temporarily cutting off its supplies. Qatar In a March 2010 press statement Gazprom said that Qatar had expressed interest in becoming involved in projects in the Yamal Peninsula at a working meeting between Gazprom's management committee and the Qatari Prime Minister Sheikh Hamad Bin Jassem Bin Jabor al-Thani. particularly in the possibility of commercialising the Tambeyskoe gas fields through the Yamal LNG project. countered that Russia's size relative to Norway dictated that it should receive a proportionally larger share of the sea and that it had claimed the area under dispute since 1926 using the meridian line rather than the median. had prevented the area from being fully opened up to oil and gas exploration. which have taken advantage of the changing differential between LNG and pipeline gas prices to drive down the cost of energy imports. 1982). as part of a more general policy of reducing energy subsidies to former Soviet satellites. in the early 2000s Belarus received gas at a price of around US$46/mcm from Russia. The disagreement between the two countries. The dispute. As a former Soviet Union country. a figure far below the market rate.000sq km of sea. In late 2006.Russia Oil and Gas Competitive Intelligence Report 2010 Norway Russia and Norway have agreed to settle a dispute over their maritime border in the Barents Sea. Norway based its claim on the 'median line' principle outlined in the UN Convention on the Territorial Sea and Contiguous Zones (1964) and the UN Convention on the Law of the Sea (UNCLOS. The Soviet Union. and later Russia. which stated that the maritime border should be drawn equidistantly between the two countries. signing a treaty in September 2010. which dates back to around 1970. By cooperating over pricing the two countries could benefit as European gas demand recovers in the aftermath of the global economic downturn. which centred on 176. The two sides will also cooperate on determining the outer limit of the continental shelf in accordance with UNCLOS. Belarus Russia and Belarus have had several disputes over energy supplies and pricing since 1991 when the latter became independent. was based on conflicting claims to an area of around 176. In addition Gazprom claimed that the Qatari delegation had expressed interest in projects in the Yamal Peninsula. The treaty includes provisions for cooperation in the development of hydrocarbons in the case of any new discoveries being made that straddle the demarcation line. however.

Kazakh oil minister Sauat Mynbayev said that the field will be the first to be developed on the territory of the two states. averaging US$150/mcm. The move follows a five-year period of near inactivity at the field. Gas prices continued to rise in 2009.7bcm of gas and 20. In BMI’s view the current situation is unsustainable and is likely to lead to a renewed flare-up of the two countries’ long-running dispute unless Belarus agrees to pay the higher price demanded by Russia. Belarus agreed that Russia would increase gas export prices to US$100/mcm rather than the initially planned US$200/mcm. equivalent to 186. This amount is set to increase. In January 2005. and Gazprom estimates that at this rate Belarus's gas debt could reach US$500mn by the end of 2010. Others In May 2009.6mn bbl. The field is Kazakhstan's second largest gas field after Karachaganak. Russia's ITAR-TASS news agency reported that the field has estimated reserves of 128. which straddles the border of the two countries. In response. Gazprom claims that Beltransgaz owes US$137. Japan and Russia signed a raft of energy cooperation deals. following a deal in January 2005 demarcating the Russia-Kazakhstan border.98/mcm in Q409 to US$169. an accord that will see Russia supply enriched uranium to Japan. The Imashev field is located on the border between Russia's Astrakhan Oblast and Kazakhstan's Atyrau Province near the Caspian Sea. One possible outcome is that Belarus will offer Russian companies an increased stake in its main energy infrastructure companies. In return for these subsidised rates. Belarus allowed Gazprom to purchase 12. but it has not been developed owing to a dispute over the border with Russia. the two countries signed a border demarcation agreement under which Kazakhstan ceded a border village covering part of the field to Russia. Kazakhstan Russia and Kazakhstan in September 2010 agreed to start jointly developing the Imashev gas and condensate field. most likely in Beltransgaz and Belarus’s Mozyr refinery. and a MoU to © Business Monitor International Ltd Page 13 .7mn tonnes of gas condensate. prices rose further from US$121. Following the Seventh Forum of Russia-Kazakhstan Inter-Regional Cooperation held in UstKamenogorsk on September 6-7 2010. in return for territory elsewhere and an agreement to develop the field jointly with Russia.22/mcm in Q110. the average 2009 price. The deals include a joint oil exploration agreement. The price reportedly increased to US$119/mcm in 2008.49mn for gas imports in the peak period of Q110. During the winter period of peak demand.Russia Oil and Gas Competitive Intelligence Report 2010 Under a deal to solve the crisis. according to Kazakh news agency IRBIS. however.5% of its state gas transit company Beltransgaz annually from 2008 to 2010 for a total payment of US$2. This progress on the field's development is a sign of Russia and Kazakhstan's willingness to cooperate on the development of shared resources. the two countries announced that they have now agreed to survey the field's reserves and prepare it for development. Beltransgaz started paying for gas at the lower rate of US$150/mcm.5bn.

according to Gazprom. the reputations of both countries as a reliable energy supplier and a transit state respectively have taken a battering. It is unclear whether Tymoshenko’s comment means that the absolute price Ukraine will pay for gas imports in 2010 will remain more or less the same or whether the same 20%-discount principle will continue to apply. Gas Transit Ukraine As a result of pricing.70 per mcm per 100km. After a number of false starts. causing a knock-on effect on European flows by January 7. with additional deals likely to be signed in future. In January 2009. told Reuters during the trip that the company wanted Russia to make sweetening amendments to its subsoil law. Russia cut off gas supplies to Ukraine on January 1 2009. Bitter wrangling between Moscow and Kiev ensued while supply disruptions in Eastern and south-eastern Europe reached crisis point. Gazprom and Ukraine's state-owned Naftogaz in November 2009 agreed to reduce Ukraine's gas imports in 2010 to 33. Furthermore.Russia Oil and Gas Competitive Intelligence Report 2010 look at ways of transporting gas from Vladivostok to Japan. Further details on the gas price and the transit fees Ukraine and Russia will pay respectively in 2010 have not been released. payment and transit disagreements. In 2009. Neil Duffin. The price that Gazprom charged Ukraine in Q109 was US$360/mcm. © Business Monitor International Ltd Page 14 . It was also agreed that Ukraine would not be fined for buying less gas in 2009. holding negotiations over expanding their presence in Russia.50/mcm Ukraine paid in 2008. head of ExxonMobil project development unit. Ukraine is said to have imported just 18. Between January and October 2009. Ukraine had agreed to buy a total of 42bcm. Putin and Tymoshenko agreed that in 2009 Ukraine would receive a 20% discount on European market prices in return for maintaining transit fees at the same rate as in 2008. the flow of gas was eventually restored on January 20. with Ukraine to start paying European-level prices and for transit fees also to reach market levels as of January 1 2010. down from the previously contracted 52bcm for that year. Russia had agreed to increase the transit fees it pays Ukraine by 60% in 2010. and the dispute has encouraged the EU to accelerate its gas supply diversification programme. transit fees stood at US$1. Executives from US oil majors have accompanied US President Barack Obama on his state visit to Moscow in July 2009. While the actual gas prices have not been released. Tense negotiations between the two countries over gas-related debts and prices continued throughout 2009 before an uneasy truce between Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko was established in November of that year. While the likelihood of a new gas supply cut in the winter of 2009/10 is significantly lower.85bcm compared with the contracted 31. almost exactly double the US$179.75bcm. Tymoshenko said that the gas price Ukraine pays 'will be almost the same in 2010 as it [was] in 2009'.7bcm. Over 2009.

stating that it reduced the pipeline’s throughput by 80% after notifying Ashgabat that it could no longer take the normal volumes owing to the economic slump.25bcm contracted in 2009. RosUkrEnergo.50bcm from Uzbekistan in 2010. is due to expire in 2012. under the terms of a new agreement signed in late December 2009. The deal was signed between Gazprom and Uztransgaz. thereby causing a rupture. The current gas supply framework. Alexander Medvedev. Uzbekistan Gazprom signed a one-year supply contract with Uzbekistan in December 2009. which was created in 2004 to replace EuralTransGas as the intermediary to manage the gas trade between Turkmenistan and Ukraine. so whether Naftogaz and Gazprom will from now on trade directly remains to be seen. Turkmenistan has boosted its efforts to diversify its customer base. although they have improved slightly since 2009 © Business Monitor International Ltd Page 15 . Gazprom said that it will be in line with conditions in the European gas market. Moscow pinned the blame on technical problems on the Turkmen side. said that the two sides had agreed to start preparation for a long-term contract. RosUkrEnergo. Turkmenistan Relations between Ashgabat and Moscow have soured following a disagreement in April 2009 over an explosion on the pipeline that transports gas from Turkmenistan's Dauletabad field to Russia via Uzbekistan. This had been agreed before. is 50% owned by Gazprom. The Turkmen government blamed Russia for unilaterally cutting the volume of deliveries through the pipeline without giving Turkmenistan due warning to relieve the extra pressure on the route. acting on behalf of a consortium of Ukrainian businessmen. and from the 50bcm that Turkmenistan exported to Russia in 2008. the transportation and export unit of state-run gas company Uzbekneftegaz. Volumes have been cut drastically from the 70-80bcm of exports envisioned under the countries' previous gas supply agreement. Following the deal. Gas exports finally resumed in January 2010. up from 11. Gazprom's deputy chairman. which was signed in 2003. in October 2008. but Turkmen President Kurbanguly Berdymukhamedov has demanded an international investigation and has said he will seek compensation from Gazprom. In response to Russia’s cut in gas purchases. Although neither side has announced the price formula. and Naftogaz will be hoping that that company's elimination will help its own balance sheets. Gazprom clarified its stance on the incident in June 2009. which provides for 30bcm of Turkmen gas to be exported to Russia in 2010 and annually to 2028. launch a new gas pipeline to China and supply gas for the EU-backed Nabucco pipeline. RosUkrEnergo has certainly profited from the Russia-Ukraine gas trade. announcing plans to raise exports to Iran. Poland Russian-Polish relations have often been fractious. signed in 2002. with the remaining 50% owned by Raiffeisen Investment through its Swiss-registered Centragas Holding. was established as a middleman between Gazprom and Naftogaz in January 2006 following the gas pricing dispute. Under the new contract Gazprom will purchase 15. A Swiss-registered monopoly JV.Russia Oil and Gas Competitive Intelligence Report 2010 In January 2009 Putin and Tymoshenko also agreed to eliminate RosUkrEnergo.

Together with Estonia. until 2045. According to a report in Polish daily newspaper Rzeczpospolita. In 2008 Lithuania received 3. threatening international court action if his government splits up Lietuvos Dujos into trading and distribution arms. Putin claimed in September 2009 that under international agreements the company should be owned 50:50 by Gazprom and PiGNIG. Tensions between Gazprom and Estonia and Lithuania have been rising since the two countries announced plans in mid-2010 to break up their Gazprom-controlled gas monopolies in an attempt to loosen Russia's grip on their energy markets and comply with the EU's energy competition directive.1bcm of Russian gas in 2008.5bcm. the operator of the Polish section of the Yamal pipeline. A new gas supply deal between Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) and Gazprom was ratified by the Polish government on February 10. According to local media. increasing its capacity from 1. has been extended from 2022 to 2037 and the two sides also agreed to extend an earlier deal for gas transit via the Yamal-Europe pipeline. Between 2006 and 2009 Gazprom unilaterally decided to pay lower transit fees than those set by the Polish energy market regulator URE. While the expansion of the pipeline is aimed at increasing gas supplies to the Russian enclave of Kaliningrad. Gazprom also built an underground gas storage facility at Kaliningrad. Gazprom has agreed to increase gas supplies to 11bcm a year. He called for an investigation into the way that the Polish company Gas Trading had acquired a 4% stake in the project. Gazprom supplies Lithuania with gas under a long-term agreement effective through 2015. which runs to Germany. with Gazprom and PGNiG holding 48% each.4bcm to 2. which was completed in late-2009. The deal's slow progress towards approval reflects disagreements between Poland and Russia over transit fees payable to EuRoPolgaz. the state-controlled Russian gas giant sent a letter to Lithuanian Prime Minister Andrius Kubillius. Prospects for an amicable solution have since been falling. Under the agreement.Russia Oil and Gas Competitive Intelligence Report 2010 under the more pragmatic new government of Donald Tusk. Lithuania is the largest gas consumer among the three Baltic states and like the rest of the region is wholly reliant on Gazprom for its gas supplies. On August 25 2010. setting the scene for a stand-off with Moscow. adding that Lithuanian government acted unilaterally without consulting the firm's shareholders. Gazprom will © Business Monitor International Ltd Page 16 . Kubillius told local media that the letter amounted to 'big company pressuring a small country'. Gazprom argues the reform will wipe out its 34% stake in Dujos. The existing supply deal between the countries. the two sides have come to an agreement under which PGNiG will receive a discount on the price paid for gas deliveries in return for dropping its claim against Gazprom. The Baltic Region Gazprom in September 2009 began transporting gas along the second branch of the Minsk-VilniusKaunas-Kaliningrad pipeline. known as the Yamal contract. Lithuania's gas company Lietuvos Dujos views it as essential for its security of supply. Lithuania has long complained that it is forced to pay some of the highest gas prices in Europe.

Latvia (34%) and Lithuania (34%). has only raised Vilnius and Tallinn's energy security fears. Azerbaijan In March 2009 Gazprom and Azerbaijan's state-owned Socar signed an MoU for the delivery of a minimum of 500Mcm of Azeri gas to Russia a year starting in January 2010. however. The same applies to even greater extent to Estonia. In February 2006. Lithuania's dependence on Russian gas looks solid. which is intended to supply Europe bypassing Russia. Prime Minister Putin said Israel is now likely to be excluded from the Blue Stream II project. have become decisively uncomfortable in Gazprom's grip. The Nord Stream subsea pipeline from Russia to Germany. The Middle East There has been much talk of extending Russia’s Blue Stream pipeline to Turkey further south into the Middle East. The Świnoujście terminal is due onstream in around 2015. As an alternative to Gazprom's supplies Lithuania is pushing the Amber pipeline project.Russia Oil and Gas Competitive Intelligence Report 2010 charge Lithuania US$320/mcm over 2010. bypassing the Baltics. The exported gas will be sourced from the first phase of Azerbaijan's Shah Deniz field. Gazprom added earlier in the month that it would be willing to buy 'all gas exported by Azerbaijan'. An average realised gas price paid by Gazprom's non-FSS European customers in H110 was just below US$300mcm. Putin stressed that the decision was not connected to an attack by the Israeli navy on a © Business Monitor International Ltd Page 17 . In January 2010 Gazprom announced plans to double gas imports from Azerbaijan to 2bcm from 2011. Lebanon. For the foreseeable future. making an extension of the pipeline to Israel unnecessary. brinksmanship with Gazprom could lead to some long cold Baltic nights. however. At a later stage. Gas from this project has also been earmarked for the EU-backed Nabucco pipeline project. Russia may also import gas from Shah Deniz's second phase. Socar's CEO Rovnag Abdullayev said following the deal that Azerbaijan would export 1bcm of gas to Russia from January 2010. Gazprom argues that owing to the small absolute volumes consumed by the Baltic states. Israel and Cyprus in a project known as Blue Stream II. with most FSS states paying significantly less. A final binding agreement followed in October 2009. Speaking during an official visit to Turkey in June 2010 however. Its two neighbours. Until the two countries develop tangible supply alternatives. Gazprom has managed to keep a presence in all the Baltic markets following the break-up of the Soviet Union and owns about a third of the national gas companies of Estonia (37%). Putin said that gas discoveries in recent years in Israel have reduced the country's future gas import projections. Turkish energy ministry officials claimed that talks were under way between Gazprom and Turkish state-run gas distributor Botaş about extending the pipeline through Turkey to Syria. In its revised form the 5bcm pipeline will link the country with Poland's planned LNG terminal. it needs a price premium to make supplying the region worthwhile. The more Russia-friendly Latvia appears to be content with the status quo for the time being.

7bn).3-4. such as Lukoil. BPS-2 will extend 1. The existing BPS transports oil from European Russia to Primorsk on the Gulf of Finland. would now be reviewed.000b/d. but that the country should pay export duties for oil exported to Europe. with the country's Aksam newspaper citing unnamed energy ministry sources as saying that Turkey's international agreements with Israel. Construction was completed in 2001 and current capacity is 1. Construction appears to have been delayed indefinitely from the June 2009 start-up date. began selling oil directly to the owner of the country's two refineries. Belarus Historically Russian companies were exempt from Russian export duties on oil exports to Belarus. In April 2007.300km from the Bryansk region to the port of Ust-Luga. This divergence © Business Monitor International Ltd Page 18 . however. The new line will boost Russia's oil export capacity from the Baltic Sea and will provide an alternative export route to the Druzhba North pipeline that runs from Russia through Belarus and Poland into Germany. This encouraged the companies to operate with so-called 'give-and-take' contracts. where they would process it for a fee at the country's refineries before re-exporting it to Europe. Oil should start flowing in Q312 at an initial rate of 600. The estimated cost is RUB120-130bn (US$4.5mn b/d. Russia imposed a limited export duty on crude oil exports to Belarus and insisted that Belarus increase excise tax on oil products. Belarus had benefited from preferential oil trading terms with its eastern neighbour. Russia had said that it would provide tax-free oil to Belarus for domestic consumption. near Primorsk. with capacity to be raised subsequently to 1mn b/d. Belneftekhim. however. Belarus argued that this would go against an agreement on a customs union that the two countries signed late in 2009 and responded by demanding higher transit fees for oil crossing its territory.Russia Oil and Gas Competitive Intelligence Report 2010 convoy heading towards Gaza. under which they would export duty-free crude oil to Belarus. This led to Russian companies ceasing the 'give-and-take' contracts and companies that had participated. as part of a general process of phasing out energy subsidies to former satellite states. with its refineries paying only around 36% of the standard Russian crude export tariff and then making a healthy profit exporting their refined products to European customers at market prices. Russia briefly stopped supplying Belarusian refineries in January 2010 after the existing supply deal expired without the two sides agreeing on a new framework. During earlier negotiations over the new oil deal. including Blue Stream II. The attack does appear to have had an impact on Turkey's view of the project. and the government approved the project in May 2007. with a branch going to the Kirishi refinery. Transneft proposed building the new BPS trunkline (BPS-2) in January 2007. which drew international criticism. Oil Transit The Baltic Region Russian Prime Minister Vladimir Putin signed an order on December 1 2008 for the construction of a second trunk line of the Baltic Pipeline System (BPS). Under the expired agreement.

830 1. which would cross Turkey from the Black to the Mediterranean coast and thereby provide Russia with another export route for its Black Sea oil terminals. crude oil exports through the Bosphorus would be halted completely.1 na 0. however. forcing companies to transport all oil volumes by pipeline. companies intending to export oil from the Black Sea would be given a quota restricting the volumes that can be transported through the Bosphorus. which is developing the project.02 Market share (%) 1.1 78. by Anadolu Pipeline Company (TAPCO). In an effort to fill the TAP pipeline. Russia agreed to supply the pipeline.3 0.5 2.5 12. Under one proposal.1 na nm © Business Monitor International Ltd Page 19 . Oil products and petrochemicals would be unaffected by both proposals and would still be transported through the Bosphorus.1 Gas production (bcm) 7.1 3.4 5.9 2. Transneft said in June 2010 that it could support proposals to impose quotas on shipments of oil through the Bosphorus. No start-up dates have been released.680 2. are due to disappear after the new customs union between the two counties comes into force in mid-2010.4 14. a 50:50 JV between Eni and local company Çalik Energy. Nikolai Tokarev. Table: Key Upstream Players Company Lukoil Surgutneftegaz Gazprom Neft*** Tatneft Gazprom TNK-BP Rosneft Russneft Total Oil/liquids production (000b/d) 1.3 0.4* na 0. Transneft was offered a 50% stake in the pipeline in December 2009. also known as the Trans Anadolu Pipeline (TAP).197 957 519 335 1.3 1. which committed Belarus to paying full export duties on re-exported Russian oil.7 21. at least two proposals are being considered to achieve this.3 0. Turkey The governments of Turkey. earlier in 2009.8 462 12 12. Volumes beyond the quota would have to be exported by pipeline.Russia Oil and Gas Competitive Intelligence Report 2010 of positions was behind the two sides' failure to agree new terms. All duties. Tokarev did not specify how the quotas would be imposed.1 9. which will eventually rise to 1. Oil flows resumed after a precarious temporary agreement was reached in late January 2010.5mn b/d.2 2.180 254 11 Market share (%) 19.3 14. Russia and Italy in October 2009 signed a preliminary agreement for the construction of the Samsun-Ceyhan oil pipeline. The 550km oil pipeline will have an initial capacity of 1mn b/d. According to remarks made by Transneft's president. Under the other proposal.

695 305 1.400* 317 Market share (%) 19e 15 3 na 5 na na *Including Ukraine. 2008 company data.5 10. .1 9 Retail outlets 2. Source: BMI.4 Gas production (bcm) na 32 2 na Market share (%) na 5. e = estimate.1 0. na = not available/applicable. na = not available/applicable.3 20.562 484 1.Russia Oil and Gas Competitive Intelligence Report 2010 Table: Key Upstream Players Company Imperial Novatek Shell Alliance Oil/liquids production (000b/d) 13.130 398 964 80 560 500e Market share (%) 16.5 7 17.170 1.1 1 na Includes JV entitlements.5 1 0. Source: BMI. ***includes all Gazprom Group companies. Company data 2009 © Business Monitor International Ltd Page 20 .5 1. Key Downstream Players Company Lukoil Rosneft Surgutneftegaz Gazprom Neft Tatneft TNK-BP Bashneft affiliates Refining capacity (000b/d) 894 1. e = estimate.5 60 106 42e Market share (%) 0.

1bn (2005) Operating Statistics (inc.38trn (2005) Net income RUB793.0trn (2009) RUB3.42trn (2007) RUB2. with Russia keen to consolidate the gas major’s position. strengthen its grip on aspects of the energy market and liberalise domestic and CIS pricing. Financial Statistics Revenues RUB3.0bn (2007) RUB613.8bn (2009) RUB742.000b/d (2007) Condensate production: 220. With higher domestic selling prices.Russia Oil and Gas Competitive Intelligence Report 2010 Company Profiles Gazprom Company Analysis The threat of a break-up appears to have passed.52trn (2008) RUB2.0bcm (2009) 550.9bn (2008) RUB658.3bn (2006) RUB311.000b/d (2008) 226. revenues and earnings. Gazprom Neft) SWOT Analysis Strengths: Dominant share of upstream gas supply Control of gas transportation system Rising export demand for gas Huge exploration upside potential Scope for domestic merger Gas production: 462. earnings will benefit and more cash will be available for supply and export expansion.0bcm (2008) 548.000b/d (2007) Weaknesses: Cost and efficiency disadvantages Rising investment requirement Artificially low domestic gas prices Opportunities: Growth in domestic/CEE/EU gas demand Large areas of unexplored territory Incorporation of Sibneft assets and management Efficiency gains/price liberalisation Threats: Russian corporate governance Changes in national energy policy © Business Monitor International Ltd Page 21 .6bcm (2007) Crude production: 645.600b/d (2008) 680. The addition of Sibneft has accelerated the growth of Gazprom and established it as the leading Russian generator of hydrocarbons volumes.15trn (2006) RUB1. It also intends to increase its direct ownership.

Cherepanov said that the company has now revised its gas production forecasts.4bcm in 2012. This was the worst performance in Gazprom's history. these targets are now looking decidedly unrealistic. are gradually being liberalised and are set to reach around US$70/mcm in 2010 and US$90/mcm in 2011. The company now expects to produce 519. Gazprom expects new generation projects in the Arctic (Yamal. said that from mid-May 2010 the company had begun to see a much sharper seasonal drop in demand than it had expected. and in phases 2 and 3 of Iran’s giant South Pars project. increasing to 20% [at a later date]'.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Gazprom accounts for 80% of Russia’s gas production (2009) and holds at least two-thirds of the nation’s gas reserves (or 15% of world reserves). By early 2010 Gazprom’s executives had acknowledged the need for a strategic overhaul owing to the negative impact of rising domestic US gas production. Gazprom also planned to supply about 25% of the world’s LNG needs by 2030. Gazprom's gas and condensate departmental head. In April 2010 he told Russian media that by 2013 the company expected to produce 565. In December 2005. however.6bcm in 2011 and to 542. There is. down roughly 10bcm on Miller's forecasts. but that target was scrapped following the decline of the US import demand. which supplies fuel to almost every Russian region. as it is forced to supply gas to the domestic market at subsidised rates. however. With output at its mature Western Siberia fields in decline. up from around US$20/mcm in early 2000s. With US demand for gas imports on the wane. Domestic prices.3bcm in 2010. © Business Monitor International Ltd Page 22 . which would be a 13-year production high. is beginning to pose a threat to its core business closer to home.5bcm. East Siberia (Kovykta. Speaking at a news conference on June 9. accounting for half of its production by 2020. He said that the company expects this to increase to 528. Shtokman). reaching new markets with LNG and underwater pipelines. It wants to add 90mn tonnes of LNG capacity by 2030. with the current low of 512bcm registered in 2001. Having scuppered Gazprom's North American ambitions. This led CEO Alexei Miller to announce a more ambitious target of 529bcm for 2010. as LNG cargoes head for European ports having been turned away from the US. The first negative consequences are already being felt by the company. the spreading 'shale revolution'. then deputy chairman Medvedev announced Gazprom's aim 'to gain more than 10% of the US market by 2010. The firm remains heavily reliant on overseas gas sales. In 2009. Vsevolod Cherepanov. pushing up Gazprom's production figures. At present Sakhalin-II is the only operational liquefaction terminal. domestic demand began to recover. the CIS states and over 25 European nations. however. Chayandinskoye) and the Far East (Sakhalin) to fuel future growth. according to preliminary government figures. In Q110. Gazprom wants to become a global energy player. The company also has a virtual monopoly control over the domestic gas pipeline network. Gazprom’s production fell to 460bcm. Notable foreign assets include minority stakes in China’s West-East gas pipeline. Strategy By 2030.

The firm’s reported interest in UK gas supplier Centrica indicates a determination to gain greater control over its Western European customers. moving into such unlikely gas producing destinations as Poland and Sweden. The Russia-Ukraine gas dispute is also likely to have hit its bottom line by around US$1-1. Gazprom is intensifying its relations with Western Europe.5bn. the oil majors are now eyeing European shale plays. has forced the company to postpone investment in expensive new projects. Bolstered by the successful application of technological advances in hydraulic fracturing (fraccing) in the US and Canada. Despite denying the report.Russia Oil and Gas Competitive Intelligence Report 2010 however. Gazprom is aiming to start producing the first 15bcm of gas in Yamal by Q312 (a year later than originally expected) and then gradually boost volumes to 250bcm per year. but this relationship is in the very early stages.14bn bbl of oil plus 10. The plan was swiftly denied by the company. and the cost of this network should ensure full usage through the long term. Russian business daily Kommersant reported that in an attempt to cut costs. including Nord Stream and Shtokman. Kommersant reported that planned investments had previously been based on US$50/bbl. The company confirmed in November 2007 that it is discussing long-term gas supply deals with several Italian utilities. which stood at some RUB1. In March 2008. including Enel and Edison. Regardless of the rhetoric. January 2008 saw Gazprom announce plans to control 10% of the French gas market by 2012/13. most of Gazprom’s current export capability is geared towards Western Europe. which will allow the Russian company to sell gas directly to the Italian market. In 2007 the company directly supplied France with only 500Mcm. In fact. with an exchange rate of US$1/RUB36. Should the European shale basins prove to be commercial. The bilateral ties are certainly getting closer. Gazprom is committed to future European energy supplies through pre-existing contracts and infrastructure. must be a concern for the company.4tcm of gas. Gazprom’s high debt levels. Meanwhile. The news follows the 2006 agreement between Eni and Gazprom to extend supply contracts to 2035. and perhaps terminally.7trn (US$56bn) in mid-2009. True. which stressed that no concrete strategic decisions have been made. as well as damaging EU confidence in Russian gas supplies. in return for increased funding from foreign partners. Gazprom announced that it may swap Russian upstream properties for some of Enel’s power assets. The Yamal peninsula is believed to contain around 2. Gazprom may invest exclusively in projects that would be profitable at a Brent price below US$25/bbl. Gazprom’s debt burden has led the company to express its readiness to reduce its stake in major projects. the Eurasian giant is busy courting the Asian market. undermined. In February 2009. In a setback for its resource nationalism agenda. however. Gazprom has previously said that it plans to sell up to 3bcm of gas to Italy per annum from 2010. despite the assured political opposition to such a deal. The economic downturn. a more fundamental threat in the making to Gazprom's position in the European gas market. Although no firm project timetable has been set. © Business Monitor International Ltd Page 23 . the competitiveness of Russian gas imports in the region will be seriously.

Prices at UK's National Balancing Point (NBP).5bn (US$x). falling to as low as US$150/mcm in early 2010. it has said that it will use its economic strength to acquire assets. which has been hoping for a steady European economic recovery to revive its flagging fortunes in its main market. E. averaged US$207/mcm in the same period. Europe's largest spot hub. raising planned investment by 13% to RUB905bn (US$29bn).ON succeed in gaining a concession. In E. as has recently been arranged between Russia and Ukraine. other European utilities are set to follow suit. Over 2009 European companies have been talking with Gazprom to reduce the volumes of gas that they are committed to buying under long-term 'take-or-pay' contracts. the German utility gained a right to buy 16% of its Russian gas imports through to 2012 at spot prices. In 2010 Gazprom has been facing pressures to reduce its European prices. Gazprom has been losing market share to Norway. Fresh demands for discounts are a highly unwelcome development for Gazprom. the company's board approved an amended version of the 2010 budget. European buyers are seeking to avoid penalties set out in the contracts by agreeing a reduction in gas purchases. has reportedly asked for a fresh price cut in August 2010. One of Gazprom's largest customers.ON Ruhrgas of Germany.ON was among five major European utilities that obtained a price concession on a take-or-pay long-term supply contract with Gazprom.Russia Oil and Gas Competitive Intelligence Report 2010 with major French utilities EDF and GDF Suez close to getting a minority stake in the South Stream and North Stream pipelines respectively. followed by Turkey's state-owned © Business Monitor International Ltd Page 24 . In September 2010. Russian daily Kommersant stated that the first company due to pay according to the 'take-or-pay' contracts is Eni on January 18 2010. only six months after receiving its first discount. Projects that were put on ice in the economic downturn are now gradually being defrosted. While realising that the company will have to overcome regulatory barriers to enter the US market. In February 2010 E. With imported gas volumes remaining below levels agreed with Russia.ON's case. In Germany in particular. To some extent the injection of an extra RUB103bn of investment in 2010 reverses Gazprom's belt-tightening in 2009. Citing an unnamed Gazprom source. and to a lesser extent the Netherlands. Latest Developments Corporate Gazprom has boosted its 2010 capex despite a downward revenue target revision. Should E. Gazprom announced plans to operate a natural gas entity in the US by 2014. In H110. In November 2007. Gazprom says it sold gas to Europe on long-term contracts for around US$300/mcm. In November 2009 Gazprom cut its 2009 capex by RUB216. Extra investment in long-term projects such as South Stream and Algerian exploration also indicates Gazprom's broad strategic ambitions of defending its position in European gas markets.

ON’s direct 3. Gazprom and Statoil signed a three-year MoU on E&P in northern Russia and Norway. Gazprom instructed its banking arm. Gazprom announced the country's largest ever debt issuance on April 7 2010.ON a 49% stake in Russia's Gerosgaz. Gazprom has apparently proposed buying a 75% plus one share in Kyrgyzgaz. At the time. By July 2009 Gazprom was set to acquire a controlling stake in Kyrgyzstan's national gas company Kyrgyzgaz. highlighting the deal’s marked political undertones. The negotiations. © Business Monitor International Ltd Page 25 . and France's GDF Suez and Total. other companies affected are Germany's BASF and RWE. which itself holds an almost 3% stake in Gazprom. According to a joint statement.2bn on Russia's bond market. (at the time of the deal 60:40 owned by Eni and Enel) acquired equity in Gazprom Neft and a 100% stake in Western Siberiafocused gas companies ArcticGaz and Urengoil in April 2007 for RUB151. however. E. Gazprom now owns 100% of Gerosgaz.Russia Oil and Gas Competitive Intelligence Report 2010 Botaş and German company E.2bn purchasing price is equal to the price paid by Eni. Gazprombank and Moscow-based Renaissance Bank to run the bond issue programme. In return. although it is significantly above 20% of Gazprom Neft’s valuation at the time that the deal went through (US$2.5% share in Gazprom has not been affected by the deal.ON. In December 2009. a Gazprom subsidiary and licence holder of the Yuzhno-Russkoye gas field in West Siberia. in an attempt to raise US$10. Gazprom and Kogas signed a gas and chemical deal worth US$102bn in September 2008. the deal seemed in Gazprom's favour as it was believed to undervalue Gazprom Neft. As part of the agreement. Russia will supply South Korea with 10bcm of gas per year over a 30-year period from 2015.2bn). replacing a 2005 cooperation agreement signed with Statoil and Norsk Hydro prior to their merger. which will comprise 13 issuances over a five-year period. In June 2009. As part of the deal. Gazprom secured an option to buy a majority stake in the gas assets and the shares in Gazprom Neft before April 9 2009 for around US$4bn. are still in progress for unspecified reasons. SeverEnergia. Gazprom received from E. In April 2009 Gazprom exercised its right to purchase a 20% stake in oil producer Gazprom Neft from Eni. following Bishkek’s approval of an agreement allowing Gazprom to participate in the company’s privatisation.54bn (US$5. The decision highlights Gazprom's attempts to take advantage of a highly active domestic bond market to restructure its long-term debt obligations.83bn) during a controversial liquidation auction of Yukos assets. In November 2009. Gazprom sold to Germany’s E.2bn for the stake.ON Ruhrgas a 25% stake in Severneftegazprom. The agreed US$4. The economics of the deal are perplexing. the companies deepened ties by signing another MoU on joint gas trade in the US. the new MoU will not only see the two companies work together in E&P but also design and development of technologies for the harsh Arctic environment. plus interest. According to Kommersant. Under the deal Gazprom will pay US$4.

potentially to fill the Sakhalin-Vladivostok pipeline. Gazprom petitioned the government in August 2009 to award it four new Yakutian permits – Srednetuginskoye. which was initially expected to come onstream in 2014.6bn. leaving Eni and Enel with 29. Gazprom is re-evaluating its global expansion strategy in the light of falling US gas import demand. An FID is due in March 2010. At the end of 2007. The field. as previously envisioned. Should a deal of this kind go ahead. proven and probable reserves at the four © Business Monitor International Ltd Page 26 . is now scheduled to start in late-2011 or early 2012. reported that if the company fails to reach an investment decision on developing LNG at the project by the December 2011 deadline. The Kirinskiy field. thereby connecting Yakutia to the expanding gas pipeline network on the Pacific coast. Gazprom said in November 2008 that it was considering US majors Exxon and Conoco as potential partners in its Yamal LNG development. Russian news agency Prime-Tass has reported that the project’s consortium may be considering sending all of the field's gas by pipeline to European markets rather than exporting half as LNG. Following the announcement by Gazprom in February 2010 that first gas from the Shtokman project has been pushed back by three years to 2016. The CBM production facility at the Taldinskoye coal field in the Kuzbass region of south-western Siberia is expected to produce up to 5bcm of gas per annum once fully online in 2011-2012. One option being looked at is a swap agreement. it would mark a significant step forward in Gazprom's North American expansion plans. It aims to launch the Samburskoye field by June 2011. raising questions over the future of the giant Shtokman development in northern European Russia. The news agency.4% and 19. Statoil (24%) and Total (25%). Tas-Uriahskoe. In June 2009. discovered in 1992. Gazprom farmed in a 51% into SeverEnergia for US$1. Eni claims the consortium’s licences hold an estimated 5bn boe of reserves. citing documents from the consortium.4bcm of gas and 64mn bbl of condensate. gas would be transported via pipeline to Europe. is estimated to hold 75. Gazprom in October 2009 announced plans to bring forward the start of production at the Kirinskiy field in the Sakhalin-III project. lowering the share of coal in the regional energy mix.000boe/d by 2013. The gas will supply the industrial belt of western Siberia.6% respectively. with output expected to reach 150.Russia Oil and Gas Competitive Intelligence Report 2010 Gazprom moved to finalise the acquisition of majority stakes in ArcticGaz and Urengoil in September 2009. the field was awarded to Gazprom. through which Conoco could be granted access to the Yuzhno-Tambeisky gas deposits in Yamal in return for Gazprom's joining projects in Alaska. The Shtokman Development Company (SDC) comprises Gazprom (51%). and exploration drilling started in July. The unexpected growth of unconventional gas production in North America has torpedoed Gazprom's ambitious plans for exports to the world's largest gas consumer. Coboloh-Nedzhelinskoe and Verhneviluchanskoe – because projected output at its Chayandinskoe Block alone would allegedly be insufficient to justify constructing a connector to the Sakhalin-Khabarovsk-Vladivostok pipeline. Projects Gazprom launched test production from Russia's first coal bed methane (CBM) project in February 2010.

24tcm. B and C1 classification). The concessions are therefore likely to be idled for years to come. to threaten to withdraw the Kovykta licence.6bcm of gas (based on Russia’s A. The newspaper’s government sources claim Putin overall supported Gazprom's suggestions. the impact of the recession on Gazprom's finances has already forced the company to freeze several high-profile projects in the east and north of the country. the company would be likely to alter contract terms to allow exports outside Irkutsk. It now appears. Nominally. Apart from its petition for four new Yakutia blocks. using somewhat perverse logic. with the eventual aim of constructing a gas pipeline to China. Moreover. for the past two years the Anglo-Russian company has been negotiating the sale of its stake to Gazprom. In the current circumstances. the majority stakeholder in the project remains TNK-BP. the same year it plans to finish the construction of the YakutiaKhabarovsk interconnector. building the required downstream infrastructure to channel Kovykta’s gas to local end-users. adding that they were 'indifferent' towards Kovykta. the Kremlin focused on TNK-BP's failure to raise gas output at the project to the 9bcm required by the terms of the contract. let alone the four new Yakutia blocks it has asked for. The MoU on TNK-BP’s sale of its interest in the Kovykta operating vehicle. to Gazprom was signed in June 2007. This was based on the assumption that the Irkutsk authorities would comply with their part of the contract. TNK-BP's inability to raise production led the Russian subsoil agency. It was thought that once Gazprom took the reins. Gazprom would find it difficult to fund the development of Chayandinskoe. CEO Miller stated that the high helium content of the block's gas would require the construction of an expensive processing plant. wholly state-owned Rosneftegaz may replace Gazprom in the ownership talks for the giant Kovykta field in the eastern Irkutsk region. According to Vedomosti’s report in July 2009. but as a result of pressure from the energy ministry. Whether Gazprom has the need or the capacity to develop the new Yakutia permits is in question.Russia Oil and Gas Competitive Intelligence Report 2010 new blocks stood at 462. that Kovykta has become the latest major gas development to be shelved by Gazprom as a result of the recession. Irkutsk has failed to do this: the utilised gas output at the field is by early 2009 was an annualised 30Mcm. Gazprom asked the government for tax holidays and/or export duty exemptions for its eastern projects. Gazprom planned to bring the block onstream in 2016. Rusia Petroleum.000km pipeline has a design capacity of 32-35bcm per annum and aimed at eventually enabling exports of Yakutia’s gas from coastal LNG terminals. In 2004 Gazprom estimated Chayandinskoe’s reserves at 1. The 6. © Business Monitor International Ltd Page 27 . however. Officials at the company told Kommersant that given the current demand conditions. According to Vedomosti. By mid-2009 Gazprom had already been awarded 14 blocks in eastern Russia without a competitive tender. over half of Yakutia’s total. which have combined reserves of 6. In pushing for the sale. Gazprom would prefer to concentrate on cheaper and lower-risk projects. Although Gazprom did not disclose its output projections for Chayandinskoe.29trn of gas and 8bn bbl of condensate. Gazprom paid around RUB11bn for the blocks. and more than sufficient for the planned pipeline to the Pacific.

suggesting the project will remain frozen for years to come. which was to transport some 30bcm of gas from 2011 and up to 85bcm at a later stage.5bn in constructing a new gas pipeline in the Far East. in the longer term it may also be used to connect remote gas reserves to the country’s export infrastructure. In the same month Gazprom announced that it was set to buy 20% of gas produced from the Exxon-operated Sakhalin-I. While Russia may previously have held the upper hand in negotiations. Gazprom boosted the annual budget for the Sakhalin-Vladivostok pipeline to RUB50bn (US$1. according to media reports. © Business Monitor International Ltd Page 28 . Sakhalin-I and -II. Although Gazprom confirmed talks with Rosneftegaz on the Kovykta transfer. Initially. Turkmenistan and Myanmar. with Exxon wanting to export the gas directly at (higher) international prices and the Kremlin wanting Gazprom to buy all of Sakhalin's I gas at (lower) domestic prices. The 1. Gazprom is also considering building an LNG export terminal and a petrochemical facility near Vladivostok. In May 2009. Gazprom intended to begin large-scale development at Kovykta by 2017. While it will be designed to supply the domestic market. Rosneftegaz. its monopoly on Russia's gas export means it will re-enter the project when the economics of the projects are deemed to be sufficiently favourable.830km pipeline is due onstream in Q311. being frozen. The project’s lifespan is 40 years. but their inability to resolve the differences resulted in the ambitious pipeline project. In BMI's view.Russia Oil and Gas Competitive Intelligence Report 2010 Previously. Gazprom announced in September 2008 plans to invest RUB23. chaired by the Vice-Prime Minister Igor Sechin. Russia and China have been in negotiations over gas exports since 2006.000b/d of condensate. even if Gazprom divests Kovykta at this stage.6bn). The pipeline will link two major projects offshore Sakhalin Island that are currently onstream. The section to Khabarovsk is already operational. Kommersant's sources stated that no final decision had been made. Gazprom announced in June 2009 that it was indefinitely delaying the construction of a gas pipeline to China after the two countries failed to come to a gas price agreement. The planned transfer of its interests to a holding company implies that even this date could be optimistic. to the mainland. 50:50 Achimgaz JV in Yamal is to produce nearly 1bcm of gas per annum and 6. Beijing is now benefiting from major new gas import deals with Kazakhstan. and is due onstream in 2010. Sakhalin-I's gas supplies will be used to feed local demand. has never participated in any active operations. The pipeline will connect the Sobolevskoe deposit with the capital of the Kamchatka region. thanks to its vast gas reserves and China's rapidly rising demand. Gazprom and its German partner Wintershall have brought onstream the Achimgaz project in July 2008. The US$1bn. Petropavlovsk-Kamchatsky. Tensions between Exxon and the Kremlin have been high owing to a disagreement over marketing rights for gas from the project.

17bn (2009) US$33.000b/d (2008) 868. Now re-christened Gazprom Neft. Financial Statistics Revenues: US$24.77bn (2007) US$20. Gazprom’s attempts to become a major oil player paid off in 2005 with the acquisition of Sibneft.000b/d (2006) Refining throughput 670. profitable business – but has given the gas giant a major opportunity to develop oil expertise.700b/d (2007) 657.700b/d (2009) SWOT Analysis Strengths: Significant role in Russian oil supply Cost-effective producing assets Substantial domestic refining business Strong retail portfolio State support Weaknesses: Lack of foreign partners Rising investment requirement Some cost and efficiency disadvantages Opportunities: International expansion Focus on under-explored Russian regions Cost cutting/asset upgrading potential Threats: Sustainability of Russian oil growth Oversupply in CEE refining capacity Competition with Rosneft © Business Monitor International Ltd Page 29 .18bn (2006) Net income: US$2.08bn (2008) US$21. Sibneft was due to have merged with Yukos to form one of the world’s leading oil producers. The collapse of the deal during the Yukos crisis. however.14bn (2007) US$3.66bn (2006) Operating Statistics Net oil production (inc. equity entitlement) 957.000b/d (2009) 932.77bn (2009) US$4.Russia Oil and Gas Competitive Intelligence Report 2010 Gazprom Neft (formerly Sibneft) Company Analysis Already the dominant force in the Russian energy sector.66bn (2008) US$4. made an eventual link with another player inevitable. Gazprom’s move denied Western companies the chance to acquire a well managed.

Sibir’s net output averaged around 80.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Gazprom Neft was founded as Sibneft in 1995 and took on a broad portfolio of former state assets. Khanty-Mansiysk. The main production arm is Noyabrskneftegaz. It will achieve this goal by purchasing refineries at home and abroad. It is now the fifth largest crude producer in Russia and has one of the best growth rates. Gazprom Neft’s upstream assets are chiefly located in the Northwest and Western Siberia (Yamal-Nenets. and the Yuzhnoe and Orekhovskoe fields. raising its stake to 95. Gazprom acquired 72% in Sibneft. as well as Irkutsk and Chukotka further east. Following two failed merger attempts with Yukos in September 2005. Gazprom Neft’s refining and market assets include the 385. which it won after significant effort. as well as a growing network of service stations primarily located in Western Siberia. The company is involved in the planned 1mn b/d Burgas-Alexandroupolis pipeline.8mn b/d by 2020 through developing Arctic fields and investing US$70bn.000b/d Moscow Oil Refinery. although Sibir’s acquisition has given it a strong position in Moscow. operated by subsidiary Magma Oil (95%).000b/d Omsk Refinery and a 60% vote in the 240. which operates about 30 fields in the Yamal-Nenets and Khanty-Mansiysk autonomous regions and holds around 60% of the company’s reserves. which will transport Russian crude to Europe and is preliminarily scheduled for completion in 2010. Gazprom Neft expects to receive the licence to develop the Arctic Prirazlomnoye deposit by 2010 and plans to start work at the giant offshore field five years later. Sibir owns 100% of 69 MKT-branded service stations. Strategy Gazprom Neft plans to produce 1. In 2009. © Business Monitor International Ltd Page 30 . 51% of Mosnefteproduct's 64 stations and storage terminals and 25% of BP's Moscow retail network. and is particularly interested in buying more European assets after in February 2009 acquiring 51% of Serbia’s Naftna Industrija Srbije (NIS). buying out businessman Roman Abramovich’s stake in a US$13bn deal. Tiumen). The company was then renamed Gazprom Neft.000b/d. Downstream. owing to its strong position in high-potential regions. Sibir's upstream operations are focused on Khanty-Mansiysk where it holds the Salym fields. the company plans to raise refining capacity until it accounts for two-thirds of crude production. Through its wholly owned unit Moscow Oil and Gas Company (MOGC). Omsk. As of Q309 Gazrpom Neft also has managerial control of Sibir Energy. jointly owned with TNK-BP and Rosneft respectively. Other major producing assets include stakes in Slavneft and Tomskneft. Tomsk.7% after exercising its buy-out right in April 2009. operated on a 50:50 basis with Shell. Gazprom Neft also works on the Northern Zadegan project in Iran.

said in December 2008 that the company may be looking for foreign partners to develop the Prirazlomnoye oil field in the Barents Sea. Gazprom Neft and Chevron formed a JV in 2007. In December 2009. The outstanding Bennfield shares are currently held as collateral by state-owned Sberbank. bringing its total stake in the AIM-listed firm to at least 54. 2. to explore for and develop assets in the Yamal-Nenets region. © Business Monitor International Ltd Page 31 . Since having trumped a rival bid from TNK-BP in late April 2009. along with a number of other licences.7bn and 700mn bbl of oil reserves respectively. Gazprom plans to hand over the field. which is expected to be completed by late-2010 or early-2011.500b/d.35% of Sibir's shares. In December 2008. Gazprom Neft acquired indirect ownership of 23.7% (following a series of opaque deals with various previous shareholders. Gazprom Neft gained majority ownership of mid-sized domestic producer Sibir Energy in June 2009 after acquiring 50% of investment company Bennfield. Gazprom Neft signed a deal to acquire Sweden-based Malka Oil’s subsidiary STSService for US$118mn. Gazprom Neft petitioned the Russian competition authorities to acquire 100% of Sibir. Gazprom’s subsidiary Sevmorneftegaz previously reneged on its intentions to bring in foreign participants and stated plans to develop the field on its own. remains unclear. STS has three licences in the Tomsk region with combined oil and condensate reserves of 189mn bbl (C1+C2). In late September 2009. CEO Alexander Dyukov has also made an offer to Chevron to develop more fields in western Siberia. Novoportovskoye and Orenburgskoye East fields hold around 1. particularly the Moscow council. The deal has yet to be approved by Malka’s shareholders. Gazprom Neft consolidated Sibir into its financial accounts and manages the company in partnership with the Moscow city council (19. which holds estimated oil reserves of 600mn bbl.3% of Sibir) remains disputed by its owners.3% of Sibir’s shares are unaccounted for). Gazprom is currently constructing an offshore production platform at Prirazlomnoye. pending payment of its outstanding debts. The ownership of the other 50% of Bennfield (and therefore 23. Gazprom Neft’s deputy director. Prirazlomnoye.Russia Oil and Gas Competitive Intelligence Report 2010 Latest Developments Gazprom Neft was awarded rights to develop the Novoportovskoye and Orenburgskoye East oil fields from parent Gazprom in December 2009. Whether it was able to come to an agreement with the remaining shareholders. Boris Zilbermints.67bn on the deals.3%). to Gazprom Neft in 2009/10. Gazprom Neft has bought out Sibir’s floating shares and some of its major investors. which in mid-2009 indicated its intention to raise its Sibir stake. Northern Taiga Neftegaz. Having bought the assets of Bennfield's joint owner Igor Kesaev. spending a combined US$1. adding that it expects an answer soon. is expected to produce 120.

Russia Oil and Gas Competitive Intelligence Report 2010

Rosneft
Company Analysis
Rosneft’s Yukos acquisitions turned the company into Russia’s largest oil producer, surpassing private rival Lukoil, and extending state control to some 40% of Russian production. In addition, the company has also become Russia’s largest refiner. Rosneft is largely state-owned, although a 2006 IPO has introduced an element of privatisation that the recession-hit Russian government in late-2009 pledged to deepen. Gazprom and Rosneft in November 2006 agreed a strategic cooperation deal that should see them share major development opportunities, rather than fighting over them. Financial Statistics Revenues: US$46.83 (2009) US$68.99bn (2008) US$49.22bn (2007) US$33.1bn (2006) Net income: US$6.51(2009) US$11.1bn (2008) US$6.5bn (2007) US$3.5bn (2006) Operating Statistics Oil production: 2.18mn b/d (2009) 2.13mn b/d (2008) 2.0mn b/d (2007) 1.5mn b/d (2006) Gas production: 12.7bcm (2009) 12.4bcm (2008) 15.7bcm (2007) 13.6bcm (2006) Proven reserves (PRMS): 22.9bn boe (2009) 22.3bn boe (2008) 21.7bn boe (2007) 11.8bn boe (2006)

SWOT Analysis
Strengths:
Largest domestic oil producer Strong relationship with government Large fuels retail network Portfolio of CEE downstream interests Weaknesses: Complex corporate structure Inherited high cost base and inefficiency

Opportunities:

Growth in Russian oil production Rise in CEE regional oil consumption Expansion into Chinese downstream market Long-term gas export opportunities

Threats:

Sustainability of Russian oil growth Oversupply in CEE refining capacity Changes in national energy policy

Market Position
Rosneft’s 19 E&P subsidies cover most of the Russian regions, but around 80% of its production comes from Western Siberia (Yuganskneftegaz and Purneftegaz) and the Volga region (Samaraneftegaz). Rosneft owns and operates seven major refineries in Russia: the Tuapse refinery on the Black Sea coast; the Komsomolsk refinery in the Russian Far; the Kuibyshev, Novokuibyshevsk, and Syzran refineries in

© Business Monitor International Ltd

Page 32

Russia Oil and Gas Competitive Intelligence Report 2010

the Volga-Urals region; and the Achinsk and Angarsk refineries in East Siberia. The company is also planning to construct a new 240,000b/d facility in Primorsk in Leningrad Region with Surgutneftegaz. Rosneft also runs export terminals in Arkhangelsk, Tuapse, Nakhodka and De-Kastri, and operates a retail network of around 600 service stations.

Strategy
Over the next two decades, Rosneft aims to become Russia’s leading energy company both in output and financial terms. To achieve this it is pursuing several policies. The company plans to increase crude production by exploiting existing oil reserves, with the goal of reaching 2.8mn b/d by 2015 and 3.4mn b/d by 2020. Rosneft also aims to exploit upside potential in gas. Rosneft believes itself to be capable of producing 40bcm by 2012, but the volumes will depend on gas sales and access to UGSS capacity, regarding which Rosneft is currently negotiating with Gazprom. The company is also developing value chains linking upstream assets directly to export markets and refining facilities. Ownership or a significant equity share in marketing subsidiaries will allow Rosneft to maximise netbacks. Under the 2010 business plan, Rosneft is planning capex of RUB217bn, equivalent to US$7.23bn using the RUB30/US$ exchange rate applied by Rosneft. The figure is the same as the investment originally envisioned for 2009. In February 2009, however, capex for that year was subsequently boosted to RUB227.85bn. Of the 2010 capex target, US$2bn will go on the refining segment, a 150% rise y-o-y. In June 2007, Rosneft then CEO Sergei Bogdanchikov announced plans to expand the company's refining capacity ninefold by 2015. Rosneft is planning to boost output in 2010 by 4.5% to 2.36mn b/d on the back of new start-ups in East Siberia. In June 2007, Bogdanchikov said the company plans to issue bonds to reduce debt and expand refining capacity ninefold. He further said that the company may build new oil refineries abroad, potentially in China and in other East Asian countries, to meet its refining capacity target by 2015.

Latest Developments
A company press statement on September 6 2010 said First Vice-President Khudainatov has been appointed President of Rosneft with immediate effect. Khudainatov's previous roles have included a spell at the Executive Office of the Russian president, as well as the position of general director of Severneftegaz. He replaced Bogdanchikov, who had been in charge since 1998. According to an FT report on September 4, Bogdanchikov is believed to have been at odds with company chairman and Deputy Prime Minister Igor Sechin. An unnamed FT source said that Khudainatov was less likely to adopt positions that conflicted with those of Sechin. Khudainatov's managerial background at Severneftegaz, a Gazprom subsidiary, has prompted speculation that Rosneft is looking to increase its exposure to Russia's gas industry.

© Business Monitor International Ltd

Page 33

Russia Oil and Gas Competitive Intelligence Report 2010

Rosneft has made a significant discovery in the Irkutsk region in Eastern Siberia, according to a statement by the Russian energy ministry in January 2009. The discovery holds 1.2bn bbl of oil (C1+C2). The discovery was made at the Sevastyanovo field in the Mogdynskiy Block, which Rosneft acquired in 2006 for RUB1.32bn (US$44mn). No further details have been released, and Rosneft has not yet commented on the discovery. Sinopec and Rosneft are considering building a 400,000b/d refinery in the Far Eastern Primorsky Krai region, the Chinese company’s chairman, Su Shulin, said in October 2009. Rosneft plans to begin exploration offshore the disputed region of Abkhazia in 2010 after a five-year E&P deal with the regional authorities was signed in May 2009. Under the agreement, two companies will be set up, one to manage upstream offshore operations and another to focus on the downstream, where Rosneft plans to build service stations and to supply gasoline, diesel and lubricants. The latter company will be a JV with the Abkhazia state company Abkhaztop. In April 2009, the Moscow Arbitration Court ruled in favour of a claim lodged by Rosneft’s Samaraneftegaz subsidiary against independent rival Russneft over the latter's purchase of a former Yukos asset. Russneft was ordered to pay Rosneft RUB5bn (US$148mn) or cede its 50% stake in the Zapadno-Malobalykskoye (ZMB) production unit. According to the claimant, under the Yukos bankruptcy ruling, ZMB owed it RUB5bn in debt arrears. The court, however, stopped short of satisfying Samaraneftegaz’s petition in full and annulling Russneft’s ZMB purchase, thus transferring its stake to Rosneft. The fact that Samaraneftegaz initiated the legal proceedings nearly three years after Yukos's liquidation suggests that control over ZMB rather than the fine is the main motivation for the claim. Rosneft and its partner Korea National Oil Corporation (KNOC) signed a preliminary deal for Kamchatka exploration in December 2008. The two companies had been exploring the area until the federal sub-soil agency Rosnedra decided not to grant a new licence when the original licence expired in August 2008. While Rosnedra failed to give an official reason for not extending the licence, it is believed that the decision was based on delays in the exploration schedule. It remains unclear whether Rosnedra has decided to grant a new licence to the partners or whether Rosneft and KNOC have come to the agreement before applying for a new licence. Under the original contract, Rosneft held 60% in the West Kamchatka Holding, whose wholly owned subsidiary Kamchatneftegaz was the operator of the project. A South Korean consortium comprising KNOC, GS Caltex, SK Energy, Daewoo International, Kumho Petrochemical and Hyundai held the remaining 40%. When considering Kamchatka’s hydrocarbon reserves, Rosneft's and KNOC’s keenness to explore and develop the area is obvious. According to Rosneft's website, West Kamchatka contains 'prospective resources' of some 13.3bn bbl of oil and 2tcm of gas. This makes it comparable in scale with Sakhalin and highly attractive to Gazprom, which reportedly also applied for the Kamchatka licence in October 2008.

© Business Monitor International Ltd

Page 34

Russia Oil and Gas Competitive Intelligence Report 2010

A partial privatisation of Rosneft was completed in July 2006, with a US$10.6bn listing of the shares in London and Moscow.

© Business Monitor International Ltd

Page 35

Russia Oil and Gas Competitive Intelligence Report 2010

Lukoil
Company Analysis
Lukoil is the leading private Russian oil company and should remain so – particularly now that ConocoPhillips is on board as a strategic investor and upstream partner. Domestic volume growth is beginning to slow, but new projects, such as the Yuzhnoye Khylchuyu field in the Timan-Pechora region and fields in Uzbekistan and Iraq, provide growth potential. The downstream portfolio is also benefiting from international investment, putting Lukoil into a position of secure medium- and long-term revenue and earnings expansion. Operating Statistics Net domestic oil production (inc. equity shares): 1.84mn b/d (2009) 1.93mn b/d (2008) 1.95mn b/d (2007) Net domestic sale gas production: 6.3bcm (2009) 8.7bcm (2008) 8.2bcm (2007) Refining throughput (group total): 893,000,000b/d (2009) 894,000b/d (2008) 976,000b/d (2007) Proven oil and gas reserves: 17.5boe (2009) 19.3bn boe (2008) Financial Statistics Revenues US$81.5bn (2009) US$107.7bn (2008) US$82.2bn (2007) US$68.1bn (2006) US$56.2nn (2005) Net income US$7.0bn (2009) US$9.1bn (2008) US$9.5bn (2007) US$7.5bn (2006) US$6.4bn (2005)

SWOT Analysis
Strengths:
Leading role in Russian oil supply Rising share of Caspian production Substantial domestic downstream business Strong portfolio of CEE downstream interests Conoco strategic partnership

Weaknesses:

Slower domestic growth than other producers Rising investment requirement Cost and efficiency disadvantages

Opportunities:

Growth in Russia/Caspian oil production Rise in CEE regional oil consumption Cost cutting/asset upgrading potential Massive Iraq development

Threats:

Sustainability of Russian oil growth Oversupply in CEE refining capacity Changes in national energy policy

© Business Monitor International Ltd

Page 36

Internationally. against 33% previously envisioned for 2016. ConocoPhillips bid for a minority Lukoil stake in 2004. Strategy Lukoil has curtailed its growth ambitions for the 2010s under its new 2010-2019 strategic development plan that was outlined in December 2009.1% of global production. Lukoil.5bn. with smaller reserves in European Russia. 20% less than the target in the previous 10-year plan (2007-2016). while boasting 1. Furthermore. Saudi Arabia and Colombia as well a contract for the second phase of the giant West Qurna oil field in Iraq. Lukoil holds stakes in E&P projects in Azerbaijan. International operations account for over 30% of Lukoil’s total refining capacity. The gas segment has also lost its shine for Lukoil. Romania and Bulgaria. subsequently raising its interest in the company to 20% at a combined cost of US$7. while investment in West Siberia and Volga/Urals will fall by 30% in comparison with the old scenario.3% of refining throughput. The new plan sees the share of gas in total production rising from 10% in 2009 to 26% by 2019. Lukoil now expects oil production to reach only 2. Egypt. Italy. Consequently.2bn envisioned under the previous 10-year plan (2007-2016). previously seen as some of its main growth regions. Ukraine.000boe/d. until it better understands the impending 'revolutionary changes' in the oil and gas industry. Kazakhstan. Uzbekistan. Fedun believes the impending 'acute glut' of global gas supply will exert strong downward pressure on prices and will hurt the profitability of its non-associated projects. The company will reduce annual capex to US$0. had been in competition for the top spot with Yukos prior to the latter’s liquidation. The biggest change in the 2010-2019 plan is a major reduction in upstream spending and output targets. the company has refining assets in the Netherlands. the company is increasingly pessimistic over output prospects from its maturing fields.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Russia’s largest private crude producer. © Business Monitor International Ltd Page 37 . Capex on E&P will total US$60bn. and retail networks in the US and most Eastern European and CIS states. Production began in mid-2008. Consequently.3% of world oil reserves and 2. 60% of its retail network and 4% of the resource base. significantly below the 4mn b/d previously envisioned for end-2016.7mn b/d by the end of the coming decade. Lukoil will postpone gas developments in the Caspian and Yamal. Lukoil and Conoco also created the 70:30 Naryanmarneftegaz JV to develop the Yuzhno-Khylchuyu field in the northern Nenets region. The bulk of the company’s E&P assets are located in West Siberia. The new plan raises the upstream capex earmarked for new generation projects from 39% to 57%. Nenets (Timan-Pechora) and the North Caspian regions. Lukoil now accounts for 18% of Russian oil production and 18. said Vice-President Leonid Fedun. Lukoil’s relationship with Conoco appeared to be weakening in March 2010 when the US company informed Lukoil of its plans to sell half its 20% stake in the Russian producer as part of a US$10bn divestment programme. with output expected to peak at 150.9bn from US$1.

The company sold to sell 7. The deal gives Lukoil a 12. and a 5% stake in the giant Tengiz field in Kazakhstan. but the new downstream budget certainly leaves little scope for large purchases. The new plan suggests Lukoil may curb its foreign downstream asset buying spree. Having reduced its capex. Capex on refining. a trunkline running from western Kazakhstan to Russian ports. Lukoil will use the freed-up funds to concentrate on improving profitability and cash flow and raising dividends.9bn and net income of US$2. Latest Developments US major Conoco decided to sell its entire 20% stake in Lukoil in mid-2010. Rumours have been circulating that Lukoil may be interested in more European refining assets that the French major is considering selling. Lukoil gained full control of the LukArco vehicle after buying out its partner BP for US$1. making it one of the high-growth potential regions for the company. Korchagin is one of Lukoil's six large discoveries in the Caspian. In December 2009. To date. The new emphasis on caution and shareholder returns mirrors that of its partner Conoco and goes against the generally resurgent mood of the oil industry. Lukoil has also significantly reduced its planned expansion.9% on the previous year. In April 2010 Lukoil brought the first oil field in the Russian sector of the Caspian Sea onstream with the launch of production from the Yuriy Korchagin deposit.000b/d of oil and 6bcm of gas per annum by 2016. Lukoil was planning to launch the Yuri Korchagin field in Russia’s sector of the Caspian Sea in early 2010.4bn in Q310. The field holds 570mn boe of possible (P3) reserves and is expected to produce 50.75bn in Q109. This is significantly below Lukoil’s © Business Monitor International Ltd Page 38 . culminating in the payment of US$725mn for a 45% stake in a Dutch refinery from Total in September 2009.6% back to the company for US$3. which saw the company acquire more than US$4bn of refining and fuel retailing assets in 2007-2009.000b/d of oil and 1bcm of gas at its peak. Revenues increased from US$14. The company hopes to achieve 1.05bn in Q110. much less than the 2mn b/d envisioned under the previous plan. with 78% of that figure earmarked for domestic projects. In September 2009 Lukoil provided an update for its North Caspian project. announcing plans to produce 200. power generation and petrochemical divisions will amount to US$25bn. while profits were up 126. Lukoil reported revenues of US$23. The investment will be channelled into upgrades and efficiency measures rather than capacity expansion.5% stake in the Caspian Pipeline Consortium (CPC). touted as one of Russia's new oil and gas frontiers.45mn b/d of refining throughput by 2019. Yuri Korchagin is one of the six large fields discovered by Lukoil in the Russian sector of the Caspian Sea since entering the area in 1995. and the remaining 60% will be sold on the open market by end-2011.6bn.Russia Oil and Gas Competitive Intelligence Report 2010 In the downstream segment. The company's growth strategy for retail networks in Turkey and Eastern Europe may also be affected. Lukoil boasts 100% exploratory drilling success in the Caspian.

Bourgas (Bulgaria) and Ploieşti (Romania).000b/d and 14bcm by 2016. which put the North Caspian target at 260. the purchase of a 10% stake in Spanish-Argentine company Repsol YPF. In June 2009. 25%). the larger Filanov (Filanovskoe). Development of the mostly gas-bearing Khvalynskoe deposit on the Kazakh maritime border is carried out under a PSA held by the Caspian Oil and Gas Company consortium comprising Lukoil (50%). state-run KazMunaiGaz (KMG. the second field. Gas output from Korchagin and Filanov will be pumped to the Russian region of Kalmykiya and then onwards to Gazprom’s trunklines. PKN’s trumping of Russian bids for a controlling stake in Mažeikių in 2006 coincided with Transneft’s decision to shut down the refinery's feedstock pipeline owing to apparent technical problems. Lukoil and Transneft have allegedly approached Polish refiner PKN Orlen over buying a stake in Lithuania's Mažeikių refinery. After Korchagin. Khvalynskoe is expected to peak at 8bcm and is preliminarily due onstream in 2016. but unnamed sources have told Reuters that the stake is less than 5%. and French companies Total (17%) and GDF Suez (8%). The companies did not comment on the size of the stake and the terms of the deal.Russia Oil and Gas Competitive Intelligence Report 2010 previous announcement made in April 2009. The April 2009 announcement called for RUB390bn (US$16. Polish media reported in April 2009. is due onstream in 2014. a state-run Russian financial institution acquired a stake in Lukoil. © Business Monitor International Ltd Page 39 . The North Caspian fields are located relatively close to Lukoil’s refineries including plants at Odessa (Ukraine). fell through in late 2008 after the Spanish government appeared to implicitly blocked the deal as a result of popular opposition. One of the company's most high-profile foreign deals.6bn) of Caspian investment.

it should rapidly become the most profitable given BP’s commitment. TNK-BP has the potential to challenge Russian oil industry leaders over the medium term.97bn (2009) US$5.1bn boe (2008) 8.7bn (2005) Operating Statistics Oil production (inc.6bn (2007) US$35.67bn boe (2009) 8. JVs): 1.5bn (2006) US$30.6bcm (2008) 9.68mn b/d (2009) 1.75bn (2009) US$51. Long-term gas interests capable of supplying the Asian markets provide another dimension.3bn (2007) US$6.3bn (2008) US$5. however.3bn boe (2007) SWOT Analysis Strengths: Major oil producer Significant share of refining capacity Large fuels retail network Portfolio of CEE downstream interests Benefits of BP management/technology Weaknesses: Complex corporate structure Inherited high cost base and inefficiencies Opportunities: Growth in Russian oil production Rise in CEE regional oil consumption Cost cutting/asset upgrading potential Long-term gas export opportunities Threats: Sustainability of Russian oil growth Oversupply in CEE refining capacity Changes in national energy policy © Business Monitor International Ltd Page 40 . BP and its Russian partners in September 2008 restructured the board and top management.45mn b/d (2008) 1. While it will take years to become a leading Russian oil company. Financial Statistics Revenues: US$34.4bcm (2007) Refining throughput (Russia): 574. signalling a new chapter in the company’s history.0bn (2005) Net income: US$4.9nn (2008) US$38.42mn b/d (2007) Gas production: 12bcm (2009) 11.Russia Oil and Gas Competitive Intelligence Report 2010 TNK-BP Company Analysis Following an acrimonious battle for control over TNKBP during H108.000b/d (2008) 778.000b/d (2007) Proven oil and gas reserves (PRMS) 11.000b/d (2009) 675. All of these opportunities depend. on the company staying in the Kremlin’s good books.6bn (2006) US$4.

including the introduction of three new directors unconnected to either side. First. Alfa director Mikhail Fridman. AAR nominates the chairman and BP the CEO. agreed to a US$6. The main gas producer is the Rospan wholly owned subsidiary. who was approved by the board. BP and AAR reportedly pitted their respective nominees. The first involves the full field development and the establishment of regional infrastructure at the eastern part of the Uvat group of oil © Business Monitor International Ltd Page 41 . signalling a breakthrough in a complex and acrimonious power struggle. Third. The second proviso was the replacement of CEO Robert Dudley with an ‘independent’ candidate Maxim Barsky. Nonetheless.000b/d. the Lisichansk plant in Ukraine can produce Euro-4 level diesel and the Saratov refinery in southern Russia can produce Euro-3 and Euro-4 gasoline. many thorny issues remain. TNK-BP is governed by a 10-member board. At the time the deal represented the single largest Western investment in post-Soviet Russia. Pavel Skitovich and Barsky. TNK-BP has four refineries in Russia and one in Ukraine. In September 2008. the owners of TNK. TNK-BP’s upstream assets are chiefly located in the West Siberia and Volga-Urals. Barsky. while the Ryazan refinery.35bn merger of their Russian businesses. BP later agreed to pay a further US$1. Following Dudley’s resignation in December 2008. ahead. albeit of a less dramatic nature.7bn (96%) is to be spent on the two upstream projects. Of the total. it allows the sale of up to 20% of a subsidiary of TNK-BP through an IPO on the international markets. in Central Russia. who previously led independent West Siberian Resources. The agreement has three main components. and we expect further ructions. The planned upstream spending is in line with TNK-BP's strategy of aggressively replacing its reserves each year. around US$1. In November 2009. with a total nameplate capacity of 560. has had the technology to produce Euro-5 diesel since 2008. Strategy TNK-BP approved a US$1. it provides for a restructuring of the company’s board. in a head-to-head competition for the post. Of these. was named the winner. The two smaller refineries are the Krasnoleninsk and Nizhnevartovsk plants in West Siberia. while Barsky is being trained. BP and AAR signed an MoU setting out a resolution to their six-month dispute over control of TNK-BP.5bcm in the Nizhnevartovsk region in 2008. however. UK-based oil major BP and Russian financial companies Alfa Group and AccessRenova (AAR). with an installed capacity of 50mn tpa and a retail network of 1. which produced 6.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position In February 2003.600 sites in Russia and Ukraine.8bn investment plan for 2010-2012 in February 2010. with representatives nominated equally by BP and AAR and decisions taken unanimously.4bn to include AAR’s 50% interest in Slavneft in the new JV. will be an interim CEO until 2011. Its downstream assets include interests in five refineries.

while the second project is the further development of the Verkhnechonskoe oil field in East Siberia. according to company's financial report. © Business Monitor International Ltd Page 42 . The move is in response to Russian legislation increasing the minimum lifespan of roads. In May 2010 the company said that it is planning to expand its premium-class bitumen production by 60% y-o-y. By end-Q110. TNK-BP announced that it had begun voluntary bankruptcy proceedings for its subsidiary Rusia Petroleum. Rusia's total debt stood at RUB11. using US$15bn of projects to deliver a recovery in volume expansion. with the focus on its core East Siberian and West Siberian regions. TNK-BP will be hoping that the investment in its upstream Siberian assets will help contribute towards its goal of replacing 100% of its production with new reserves each year. The conclusion of long-term contracts with customers of TNK-BP requires guarantees of gas transportation by Gazprom. In February 2008. the operator of the Kovykta field. TNK-BP initiated bankruptcy proceedings against Rusia after recalling its loans to the subsidiary in mid-May 2010. according to Reuters.4bn (US$367mn). TNK-BP’s growing gas output is obliging the group to negotiate with pipeline monopoly Gazprom over the offtake of the extra volumes. There have also been talks with Gazprom over the joint construction of a now-scrapped LNG project near St. Although the company did not state the preferred buyer for Russia’s assets.9. TNK-BP has started signing long-term (three-year) contracts for the supply of gas to customers.mn b/d by 2012. Petersburg.000b/d).Russia Oil and Gas Competitive Intelligence Report 2010 fields. TNK-BP announced plans to increase production by 18% to 1. it is most likely that the Kovykta licence will find its way to government-connected firms. Of this amount. In March 2009.3bn package outlined in October 2009 to enhance fuel quality from the company's refineries. On June 3 2010.000b/d Saratov refinery. TNK-BP said it would invest US$1bn by 2012 into development of the Samotlor field for maintaining oil production in it at a level of 30mn tpa (600. US$137mn has been earmarked to upgrade a diesel hydrotreater unit at the company's 130. as part of a US$1. The announcement of the new spending follows a statement by TNK-BP in October 2009 that it was planning to invest US$400mn in its fields in the Yamal Peninsula. according to the company in November 2007. The company aims to spend around 80% of its total budget each year on upstream projects. US$180mn was allocated for developing its heavy oil Russkoe field in 2010/2011 and the remaining US$220mn was put towards its Suzun and Tagul oil fields. Latest Developments TNK-BP in July 2010 was in talks with unnamed banks over taking a US$700mn unsecured three-year loan.

© Business Monitor International Ltd Page 43 . TNK-BP entered the Uvat district in the early 1990s and has since discovered an estimated 1. to Gazprom. In early February 2009. TNKBP aims for a 50% increase in production of its polymer-modified TNK Alfabit brand of premium bitumen from 24. Secero-Kachkarskoe. TNK-BP is ramping up volumes at the Uvat project in the Tyumen region of West Siberia. Yuzhno-Venikhyartskoe and Zapadno-Epasskoe fields. The Ust-Tegusskoe and Urnenskoe fields will account for half of that figure. Kalchinsoe. Russia's subsoil agency. with the company planning to incorporate its assets in the neighbouring Omsk and Khanty-Mansiysk regions into the project.000b/d in 2010.000 tonnes in 2010. TNK-BP claimed that using TNK Alfabit. Russia's environmental watchdog Rosprirodnadzor has advised Rosnedra.61mn bbl of recoverable reserves (C1+C2) in its 13 licences in the area.000b/d in 2009 and above 100.Russia Oil and Gas Competitive Intelligence Report 2010 which will boost demand for longer-life bitumen products. the first of which.8% stake to a stateowned company. Peak production is expected to be between 200. an MoU was signed under which TNK-BP agreed to sell its interest in Rusia. A dispute over the field's development has been ongoing for years.47-1. The company expects to reach peak output of approximately 220. However.000b/d. the operator of Kovykta. this output target was based on the assumption that the Irkutsk authorities would comply with their part of the contract through building the required downstream infrastructure to channel Kovykta's gas to end-users. The Russkoye field. Protozanovskoe.Malyk. while the other half will come from smaller satellite fields that are yet to be developed.5bn. Talks over the sale broke down. the field remained undeveloped owing to the challenging climate and the lack of heavy oil processing technology. A.25bn bbl of oil reserves (international P3 classification).000b/d in 2015/16. Sredne-Keumskoe. could extend the life of a road to seven-10 years from the current two to three years. total investment in Uvat was set to reach RUB13bn.000 tonnes in 2009 to 36. however. with TNK-BP being pressured to sell its 62. to withdraw the licence for the Kovykta gas condensate field from TNK-BP. Uvat is set to become a cornerstone of TNK-BP's Western Siberian strategy. holds an estimated 2. By end-2009. TNK-BP estimates the total cost of developing the field at US$4. output from the two new fields was expected to average 60. Nemchinovskoe. and since July 2009 Gazprom seems to have put its interest in the field on the backburner as a result of the recession. entered production in 1993. Discovered in 1968. There are currently 21 known fields in the Uvat project. Discoveries in 2007/08 included the Kosukhinskoe. To contribute to the 60% growth target. According to TNK-BP's figures cited by Oil & Capital. depending on whether TNK-BP constructs facilities for blending the oil to allow it to be transported by pipeline. In the past Rosnedra has argued for the removal of the licence from TNK-BP thanks to the company's inability to raise production to 9bcm as required under the terms of the licence. 250km south-east of Moscow.000b/d and 400. which will be produced at its pilot plant in Ryazan. its subsidiaries Tyumenneftegaz and TNK-Uvat brought onstream the Ust-Tegusskoe and Urnenskoe fields. In June 2007. located in Russia's Yamal-Nenets region.

Kovykta's reserves are estimated at 2tcm (C1+C2). with capex of US$500mn planned for 2009.100b/d over 2009. TNK-BP in August 2009 announced plans to construct a new 450Mcm gas processing plant at the Pokrovskoe oil field in the Orenburg region by 2012. Viktor Vekselberg. Although cost estimates for the Pokrovskoe facility have not been announced. © Business Monitor International Ltd Page 44 . TNK-BP announced the start of new phase of production at the Kamennoye oil field in West Siberia.000b/d of crude from fields in Western Siberia. Kommersant’s industry sources put the price tag at US$150-400mn. with the company producing over 360. announced in June 2009 that the sale of Kovykta could be imminent and the government was close to including Kovykta in Gazprom’s investment programme. It is estimated that around 80% of TNK-BP’s gas production in 2009 will be a by-product of oil production. By end-2008. In June 2009. which is expected to average 26. a JV between TNK-BP (68%) and Rosneft (32%). TNK-BP already reached a deal with Gazprom to link the plant to its pipeline system. VerkhnechonskNefteGas. Capturing 95% of associated gas production is nominally a legal requirement in Russia. TNK and Sibneft jointly acquired Slavneft in 2004’s privatisation auction. one of the company’s Russian co-owners.000b/d by 2015. whose other shareholders are Interros Resources (26%) and the Irkutsk government (11%). Pokrovskoe is operated by TNK-BP’s subsidiary Orenburgneft. Crude is exported to Asia via the ESPO pipeline. boosting its output to 36. In mid-October 2008. TNK-BP has not been unable to meet the contracted output targets. began commercial oil production at the Verkhnechonsk field in East Siberia. TNK-BP holds 62. TNK-BP said it had invested around US$1bn in the field to date and is likely to spend another US$4bn over the course of its producing life. Russian police raided TNK-BP headquarters on March 2008 as part of a long-running criminal investigation against Sidanko Oil (one of the companies merged to form TNK-BP in 2003).900b/d.8% in Kovykta through its stake in Rusia Petroleum. Currently.Russia Oil and Gas Competitive Intelligence Report 2010 With Irkutsk having failed to fulfil its side of the contract. In 2004-2008.000b/d. TNK-BP had already invested over US$600mn in gas utilisation projects and the company plans to invest a further US$700mn in such projects by 2012 with the view of raising the utilisation from the current rate of roughly 80% to 95%.600-200. TNP-BP invested over US$600mn in Kamennoye and hopes to boost its output to 80. TNK-BP believes Verkhnechonsk to hold recoverable reserves of over 1bn bbl of oil and sees peak production at 140.

100b/d (2009) 501.311 bbl (2009) 6. and has a small and inefficient downstream operation. Attempts to diversify internationally have met with mixed success. State priorities do not necessarily coincide with those of the company. with modest exposure in Ukraine and a stalled deal in Turkey.000b/d (2007) Gas production 756Mcm (2009) 760Mcm (2008) Proven oil reserves: 6.500b/d (2008) 517. Investment is required at high levels in order to maintain output.8bcm (2007) Financial Statistics Revenues: RUB220bn (2009) RUB444.3bn (2008) RUB356. Net income/(loss): (RUB100bn) (2009.3bn (2007) RUB318.) RUB8.3bn (2006) SWOT Analysis Strengths: Dominant oil producer in Tatarstan Growing CEE portfolio Domestic refining and marketing interests Involvement in petrochemicals supply Weaknesses: Rising investment requirement Modest refining/retail capacity Limited upside potential in oil supply Opportunities: Growth in local oil/regional demand Expansion of petrochemicals segment Downstream oil upgrading/expansion Threats: Sustainability of upstream oil volumes Oversupply in CEE refining capacity Changes in national energy policy © Business Monitor International Ltd Page 45 . expand petrochemicals capacity and enlarge/improve its downstream arm. prelim.Russia Oil and Gas Competitive Intelligence Report 2010 Tatneft Company Analysis Tatneft is struggling to deliver upstream volumes. and Tatneft looks unlikely to be able to compete effectively with its larger Russian peers.25bn bbl (2008) 5.8bn (2006) Operating Statistics Crude production: 519.3bn (2007) RUB29.91bn bbl (2007) Proven gas reserves 36.41bn (2008) RUB43.

incorporating a polypropylene and polyethylene production plant. in which Tatneft holds a 50% stake. The company’s crude output is expected to remain flat over the next five years.7bn. Tatneft holds an 8. was oversubscribed. The three-year loan. which is currently being built at Nizhnekamsk in Tatarstan. the TAIF group of companies (6%) and employees (8%).5bn from US$900mn. Tatneft will also expand its service station network and the capacity of the Nizhnekamsk synthetic motor oil plant. as it is already investing billions to maintain production levels at its ageing fields.Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Tatneft is the main oil company active in the Volga region of Tatarstan and the country’s sixth largest oil producer. Latest Developments In November 2009. In May 2009. Kalmneftegaz. has booked 35bcm of gas reserves from a discovery in northern Kalmykia. Tatneft increased its syndicated loan to US$1. The group’s key shareholders are the regional government of Tatarstan (with 31%).000b/d Kichuyi plant (100%) and the Nizhnekamsk plant (63%). The company also has exploration acreage in Libya and Syria. The loan will be used for general corporate purposes particularly for Tatneft's refinery and petrochemical complex. and a network of over 600 service stations in Russia and Ukraine.000b/d UkrTatNaft. Strategy Tatneft said in January 2004 that planned expansion projects through to 2010 would cost over US$2. which is secured on oil exports. the 20. © Business Monitor International Ltd Page 46 .6% stake in Ukraine’s largest refinery. Downstream assets include two Tatarstan refineries. the 370. This will include a US$1.3bn processing complex at the Nizhnekamsk refinery.

000b/d (2007) 7. production at Kharyaga is expected to rise to around 60.000b/d (2006) Net gas production: 204Mcm (2009) SWOT Analysis Strengths: Offshore and deepwater expertise Good relationship with Gazprom Weaknesses: Rising investment requirement Unpopularity of PSAs Opportunities: Rise in CEE regional oil and gas consumption Potential for award of further Russian acreage Threats: Sustainability of Russian oil growth Changes in national energy policy Uncertainties over financing and future operations of Shtokman Market Position Total’s interest in Russia is concentrated in the Arctic region of Yamal-Nenets. The company has also been named partner of the Shtokman development field. The combined investment in the project is put at US$900mn.000b/d.0bn (2008) EUR158. but it may not gain ownership of Shtokman’s reserves or production.4bn (2006) EUR11.000b/d (2008) 7.7mn (2007) EUR132. The French company is keen.000b/d (2009) 8. Zarubezhneft (20%) and the Nenets Oil Company (10%).6bn (2009) EUR13.1bn (2005) Net income: EUR8.6bn (2005) Operating Statistics Net oil production: 11. which holds estimated reserves of 1. The other partners in the project are Statoil (30%).9bn (2008) EUR12. Total has some petrol outlets across the country. Current output is around 20. Downstream. which is controlled by the regional government. Total’s most significant upstream asset is its 40% stake in the Kharyaga field. to increase its stake in Russia’s upstream despite the challenging business environment.2bn bbl of oil.Russia Oil and Gas Competitive Intelligence Report 2010 Total Company Analysis The French major’s focus in Russia is the European Arctic.000b/d by 2013. The 29-year PSA was signed in 1995 and came into operation in 1999. The company has a 50% interest in the Kharyaga oil field. Financial Statistics (Group) Total revenue: EUR131.7bn (2006) EUR117. © Business Monitor International Ltd Page 47 . In the downstream segment. Total operates petrol stations across the country’s main cities. but following the development of Phase 3.3bn (2009) EUR180.2bn (2007) EUR11. as are most IOCs.

7mn in development of the Kharyaga field during 2009. with Gazprom retaining all output marketing rights. This has prompted concern that Total’s share in the field could go the way of Shell’s Sakhalin-II stake and TNK-BP’s interest in Kovykta.2tcm. with the company’s CEO claiming that it will do so. In June 2009. Latest Developments In June 2009 Putin approved a JV between Total and independent gas producer Novatek. which provides for state control over resources and production with minority stakes for foreign partners. Russian authorities approved an increase in the 2007 cost estimate for Kharyaga oil field. Total was given Shtokman stake. as saying that Total and Gazprom are looking at more joint projects in Russia. Total will take a 49% stake in Terneftegaz. Christophe de Margerie. the company will invest US$4-5bn in the project over the next five years. Cost overruns on PSAs have been a major sticking point between IOCs and Russian regulators. a Novatek subsidiary. ending previous disputes over the project’s spending. The operating consortium will take on all the risks and will own the infrastructure for 25 years once production has started.3bcm Termokarstovoye field in Yamal-Nenets. the energy ministry accused Total of failing to comply with the terms of Kharyaga’s licensing agreement. in July 2007. while Gazprom’s statement suggests that this is not the case. will be held by Gazprom’s 100%-owned Sevmorneftegaz unit. © Business Monitor International Ltd Page 48 . the company gained a 25% stake in the Shtokman field in the Barents Sea. However.Russia Oil and Gas Competitive Intelligence Report 2010 In July 2007. Putin's good relations with de Margerie are likely to give Total the reassurance it needs to increase investment in Russia. The Russian government in April 2009 approved Total’s plans to invest US$403. Strategy The French company has been one of the few foreign majors to maintain investment in the country. and be sold to Gazprom. In March 2007. The licence for the field. as well as in LNG transportation. Les Echos newspaper cited Total’s head of E&P. The company has relevant expertise in deepwater and long-distance gas production. The partners will carry out further appraisal and development studies with the aim of launching the project in 2011. and even intimated that the French group could be chosen for the second phase of the Shtokman field project. According to Total’s CEO. in spite of the new paradigm for foreign investment in the country. as PSAs only oblige operators to share their profits with the state once their expenses are recouped. Yves-Louis Darricarrere. which holds gas reserves of around 3. Putin’s blessing followed Total’s sale of its stake in its Dutch refinery to Lukoil. The company seems to be benefiting from France’s admission of Gazprom into the national downstream market. Following a meeting with Total's CEO. It is speculated that in return for greater access to the French market. Putin approved Novatek and Total's US$900mn plan to develop the 47. There has been some confusion over whether Total will be allowed to book a 25% share of the field’s reserves. Under the deal. however. which holds the Termokarstovoye licence.

Gazprom performed a sudden volte-face and declared that it would develop the field on its own. first stating that it would allow IOCs in contractors. Gazprom had pre-selected IOCs to act as minority equity partners in the field’s development. In 2006. and the French major lost its appeal against the decision. © Business Monitor International Ltd Page 49 . and shortlisted Total. Rosneft cancelled a deal with Total to develop the Vankor oil field. however. following months of indecision by Gazprom.Russia Oil and Gas Competitive Intelligence Report 2010 In July 2007. and then giving Total a major role in the field’s development. and US majors Chevron and ConocoPhillips. Originally. along with Norway’s Statoil and Norsk Hydro. In October 2006. Gazprom has gradually softened its approach. Since then. Total was chosen as a partner in Shtokman. especially considering its lack of LNG experience at the time. This move raised doubts among analysts as to whether the company had the financial resources and technical ability for such a challenging project.

Its proven reserves were 8. © Business Monitor International Ltd Page 50 . and the discovery of new deposits in the Khancheyskoe field. reaching 32bcm of output in 2009. Novatek has been growing steadily.85bn boe (end-2009) SWOT Analysis Strengths: Large untapped Arctic gas field Good reserve base Good Kremlin connections Condensate cash flow Weaknesses: Remote deposits High costs of LNG projects Kremlin’s anxiety over foreign partners in the Arctic Opportunities: Northeastern Passage Exports to Asia Threats: Lack of export markets Resurgence of Gazprom’s monopolistic instincts Cost inflation in the Arctic Market Position Novatek was founded in 2004 and is Russia’s largest private gas-focused player. however. The strong reserve growth was attributed to new wells at the Yurkharovskoe and Sterkhovoye fields.9bn (2008) Operating Statistics Net Condensate Production 60. although Gazprom has a 19% interest.1bn (H110) RUB25. as the company will be challenging Gazprom’s export monopoly.3bn (H110) RUB86.Russia Oil and Gas Competitive Intelligence Report 2010 Novatek Company Analysis Russia’s largest private gas producer is going from strength to strength. The company is majority-owned by its management.7bn (2009) RUB22. The big test for the company’s ambitions. plus 60.85bn boe by the end of 2009. will come once its Arctic LNG projects get under way.000b/d (2009) Net Gas Production 32bcm (2009) Proven Hydrocarbon Reserves 8. While still a minnow in comparison with the state gas giant. Financial Statistics Sales RUB52.1bn (2008) Net income/(loss) RUB18.9bn (2009) RUB76. On the back of good Kremlin connections and solid management. focusing its activities on Yamal-Nenets.000b/d of oil and condensate. production and reserves continue to rise steadily and profitability remained strong even in the 2008-2009 downturn.

Although Inter RAO is already contracted to buy that gas from Gazprom. which is expected to begin exporting gas by about 2018. Through its controlling stake in the Yamal LNG operating vehicle. Conoco has also previously expressed interest. Novatek is the operator of the South (Yuzhno)-Tambeyskoe gas field onshore the Yamal-Nenets region. In June 2009 Timchenko raised his direct stake in the company to 20. Gazprom shortlisted Total and Shell for participation in Yamal LNG. when Gazprom conceded the independent a right of access to the national pipeline. A number of IOCs.1% in Yamal LNG through a subsidiary as well as directly controlling a 19% stake in Novatek. have made overtures to Novatek about joining the Yamal LNG scheme. Strategy The company is pursuing a two-pronged strategy – boosting supplies to the domestic market while developing LNG export projects in Yamal. Yamal LNG is the operator of the South-Tambeyskoe gas field in the Yamal-Nenets region. is a formidable competitor. Novatek. denying rumours of a planned share offer. The project is known as Yamal LNG. Novatek paid US$650mn in cash to acquire a 51% stake in Yamal LNG. In June 2009. Novatek was able to woo the utility with lower prices. To advance Yamal LNG.Russia Oil and Gas Competitive Intelligence Report 2010 As the company aims to expand its share of the domestic gas market. with 65bcm from 2010 to 2015 at a cost of about RUB177. however. Gazprom holds another 25. adding that Mitsui and Mitsubishi were also expected to obtain minority rights in the project.8%. The chief executive officers of the two companies agreed to begin third-party negotiations on the project following a meeting in August 2009. a former secret service official with close connections to Vladimir Putin. as well as Qatar government. in August 2010 Novatek shipped its first cargo of condensate using the Northern Sea Route (known as the Northeast Passage) to demonstrate the feasibility of selling its resources in the © Business Monitor International Ltd Page 51 . Gazprom previously said it aims to start producing the first 15bcm of gas in Yamal by 2011 and then to gradually boost volumes to an ambitious 250bcm per year.3bn (US$6bn). which is keen to protect its quasi-monopoly on distribution. Latest Developments In May 2009. Novatek will need a well-heeled foreign partner but the company has given conflicting indications about when this will happen and who will be joining it. Inter RAO UES. to the ire of the state gas giant. although the financial crisis is likely to delay this. This enabled Novatek to continue with the deal to supply subsidiaries of Russia’s largest power provider. it is beginning to clash with Gazprom. Gazprom previously announced its intention to begin feasibility studies on an LNG plant on the peninsula in early 2010. Novatek scored a major victory in November 2009. Although no firm project timetable has been set. Amid much fanfare. in return for an 18% net-back transit fee. boasting the support of Genadiy Timchenko.

fuel costs and the risk of pirate attacks.Russia Oil and Gas Competitive Intelligence Report 2010 Barents Sea region directly to Asia.500km. Novatek can reduce its normal journey to China and Japan of about 20. A cargo of condensate was dispatched to China in Sovcomflot's hightonnage tanker Baltica with support from a nuclear icebreaker. By using the Northeast Passage. © Business Monitor International Ltd Page 52 . which would significantly reduce transit time.400km around the Suez Canal to about 12.

was formed in 2003 when its owner Mikhail Gutseriyev left Slavneft and purchased some of its assets. Operating Statistics Refining Capacity: 132. Russneft also owns two refineries: the 132.25bn (2007) RUB9.70bn (2007) RUB102. Ural. these problems now appear to be over for Russneft. It has 30 separate upstream operations split into four groups – West Siberia. giving it the chance to stabilise its declining crude production.45bn (2006) Net Profit : RUB15.58bn (2008) RUB12. service stations. the company’s main challenge during the late 2000s has been dealing with state influence and legal disputes. With the threat of a merger with Bashneft in the future.Russia Oil and Gas Competitive Intelligence Report 2010 Russneft Company Analysis Although a relatively small producer by Russian standards. Povolzhsk and central Siberia – and has recoverable reserves of 4. In the downstream. While this means the company is relatively safe from crude oil price fluctuations.000b/d in 2009. two refineries.14bn (2009) RUB137. Following its acquisition by Sistema in 2010. In 2009 the Orsk refinery © Business Monitor International Ltd Page 53 . Russneft is well integrated with upstream oil assets.328b/d (2006) Financial Statistics Revenue: RUB116.6bn bbl. the company’s independent existence seems to be at risk. and a fuels terminal. one of Russia’s largest privately owned energy companies.594b/d Orsknefteorgsintez plant in Orsk (Orenburg) which produces fuels and the Neftemaslozavod plant which it acquired from TNK-BP in 2005 and is dedicated to producing lubricants and protective rustproof compounds.94bn (2006) SWOT Analysis Strengths: Integrated upstream and downstream Diverse upstream oil portfolio Weaknesses: Declining oil production Oversupply in CEE refining capacity Opportunities: Growth in Russian oil production Rise in CEE regional oil consumption Threats: Vulnerable to state influence Large state-run competitors Market Position Russneft. Russneft produced 255.082b/d (2008) 281.10bn (2008) RUB113.57bn (2009) RUB10.594b/d (2009) Oil Production: 254.942b/d (2009) 286.260b/d (2007) 296.

helping it fill its refineries.000b/d. Leonid Melamed. The negotiations broke down after the © Business Monitor International Ltd Page 54 . According to the Interfax news agency.5bn (RUB45. Russneft agreed to pay RUB6. the merged company would then conduct an IPO. Sistema would allow the two companies to merge. Gazprom Neft appears to have baulked at Deripaska's reported valuation of the company. The Russneft stake will allow Sistema to balance out its downstream-heavy portfolio. The announcement followed remarks by Sistema President. Gutseriyev then sold the company to a Basic Element (Basel) investment vehicle controlled by Oleg Deripaska. Russneft was breaking the mould of an increasingly state-dominated industry. according to Vedomosti’s sources. Gutseriyev agreed to farm out 49% of Russneft to conglomerate Sistema for an undisclosed amount.9bn).Russia Oil and Gas Competitive Intelligence Report 2010 processed about 105. In May 2010 Gutseriyev said Russneft was considering merging with Sistema subsidiary Bashneft in two to three years. we expect the businessman's extensive experience in the oil sector to spur Russneft's development in the next few years. in return for assuming the company's US$6bn worth of debts and US$600mn in cash. Gazprom Neft suspended talks over the purchase of Russneft in April 2009.000-b/d in the Bryansk region. Russneft's stake in the project remains threatened by a competing ownership claim from Rosneft.6bn. In January 2010 Gutseriyev agreed to take over Russneft from Deripaska. excluding debt. a major businessman generally seen as a Kremlin ally.000b/d of oil in the next few years and to make an annual profit of US$1.5-8bn. In August 2009 Russneft and its partner MOL settled an internal dispute over the jointly operated Zapadno-Malobalykskoye (ZMB) field in West Siberia. giving it a utilisation rate of less than 80%. Recent Developments In September 2010 Sistema announced the process of restructuring Russneft’s debt was nearly complete. while Deripaska valued the company at US$7.3bn (US$201mn) debt for the oil it bought from ZMB. which is estimated at US$5. after owner Gutseriyev was charged with tax evasion. According to Gutseriyev. Although the settlement has diffused internal tensions. Strategy Now that Gutseriyev's relations with the government have apparently been mended at present. until its shares were frozen by a district court in August 2007. in May 2010 that once Bashneft covers debts of US$7bn. He added that Russneft intends to increase its annual oil production to 400. Gazprom Neft wanted to buy Russneft by assuming its debt. Following his return. The Kremlin's removal of an international search warrant for Gutseriyev in November 2009 enabled Russneft’s founder to resume ownership of the company. The company also owns a network of 96 petrol stations (end-2009) and a crude oil terminal producing 140.

Russia Oil and Gas Competitive Intelligence Report 2010 indebted Deripaska was thrown a lifeline by state-owned Sberbank. © Business Monitor International Ltd Page 55 . which agreed to restructure one of Russneft’s loans.

Prime Minister Vladimir Putin himself owns 37% of Surgutneftegaz. Surgutneftegaz made its first foray into international markets. Sistema will reportedly invest RUB100bn (US$3. the governor of Bashkiria. The © Business Monitor International Ltd Page 56 . helping it to fill its refineries. Sistema reached a preliminary agreement to acquire 49 % of Russneft.000b/d. is somewhat erratic. plus five affiliated refining and marketing concerns. Its reporting of profits.5% stake in Bashneft. The company’s biggest revenue earner. Novoil. to the chagrin of the Hungarian government. however.24bn) in upgrading its Bashkir refineries in 2011-2014. in September 2010. Given Sistema's growth ambitions. and accounts for around 10% of Russia’s refining capacity.8% crude output growth in Bashkiria in 2010. In March 2009. the regional quasi-monopoly. gas output totalled around 14. The announcement was made by Rustem Khamitov. Sales in 2008 amounted to RUB547bn. The company’s downstream assets include the 398. however.2mn b/d in 2009. According to a statement by Russian strategist Stanislav Belkovsky to German newspaper Die Welt in 2007.Russia Oil and Gas Competitive Intelligence Report 2010 Surgutneftegaz – Summary Surgutneftegaz is the fourth largest crude producer in Russia. The Russneft stake will allow Sistema to balance out its downstream-heavy portfolio. instead classing the stock as treasury shares. Its traditional base is southern West Siberia but it has been expanding into Timan-Pechora and Khanty-Mansyisk in the north and views Eastern Siberia as another growth region. The company produced around 234. Sistema is now pushing to acquire full ownership of the Bashir assets. Surgutneftegaz is an opaque company. Crude production averaged 1. Production of refined products in 2008 stood at 420. Ufaorgsintez and Ufimskiy plants. Further upstream growth is expected to come from the once-sleepy Bashneft.000b/d Kirishi Oil Refinery (KINEF) in the Leningrad region.000b/d from around 140 fields in Bashkiria and neighbouring Tatarstan and Udmurtia in 2008. further acquisition of oil assets in Russia and the former Soviet Union is to be expected in the near future.2% stake in Hungarian oil and gas company MOL. Marketing arm Bashkirnefteproduct has around 317 service stations in the region. acquiring six major upstream and downstream businesses in the Republic of Bashkortostan (Bashkiria) in the Urals region. paying US$1. with Sistema targeting 7. Bashenft holds 2.1bcm. Sistema – Summary Telecom-focused Russian conglomerate Sistema made a big entrance into the oil industry in April 2009. as it does not follow international accounting standards. which comprises the Ufaneftechim. Retail assets include a network of around 300 service stations in Northwestern Russia. In early-2010. It moved 42% of its shares to a separate company in 2003 and since then has not revealed the ownership of that stake. is its large affiliated refining business.2bn of proven reserves and is the second largest producer in the Volga-Urals region after Tatneft.4bn for a 21. The deal gave Sistema a 76.

The partners are developing the West Salym. peaking at around 160. the only producing field so far. Shell is also involved in the Salym group of oil fields in Western Siberia through a 50:50 Salym Petroleum JV with Sibir Energy. The partners are developing the Chayvo. a Gazprom Neft subsidiary.Russia Oil and Gas Competitive Intelligence Report 2010 move will help it remain competitive in the fuels export market as local rivals such as TNK-BP invest heavily in their own plants. having relinquished control to Gazprom in December 2006 after a drawn-out battle. working alongside two units of Rosneft (20%). In March 2009 Salym Petroleum extended a drilling contract with US-based oil field services company Halliburton in a deal worth US$100mn.000b/d in 2008 and 165. Itochu and Marubeni (30%). In December 2009 Sistema signed a strategic cooperation agreement with India’s ONGC for joint energy projects in the FSU. Upper Salym and Vadelyp fields. Halliburton has been working at Salym since 2005 and will now remain there until at least 2013. it has traditionally been a gas trader but in the 2000s got involved in production.000b/d in 2009. Shell has proposed developing Yamal reserves with Gazprom. An opaque company. mostly from West Salym.000b/d in 2009. Previously. Odoptu and Arkutun-Dagi offshore fields. which were abandoned by BP. While Itera is keen to establish itself as a leading ‘independent’ Russian gas producer.5% minus one share.000b/d (somewhat below initial expectations) and has been declining since. Oil production from Chayvo. In February 2009. Shell held a 55% stake but now retains 27. Shell’s former CEO Jeroen van der Veer also said the company was looking to discuss joint projects with Gazprom in the Far East. This was followed in June 2009 by Putin’s informal invitation to Shell to join the Rosneft/Gazprom-led Sakhalin-III and -IV project. Royal Dutch Shell – Summary Anglo-Dutch Shell is no longer the leading member of the US$10bn Sakhalin-II integrated project in the Far East. Production peaked the very next year at around 225. In spite of the chequered history of its Russian operations. Itera works close with Gazprom and has access to its pipeline system. averaging 193. it has backed a continuation of Gazprom’s near-monopoly. which hold an estimated 600mn bbl of crude reserves. Japex. Itera – Summary Itera is another significant domestic Russian gas player. began in 2006.3bn bbl of crude and 485bcm of potential recoverable gas resources. ExxonMobil – Summary US major's subsidiary Exxon Neftegas (ENL) operates the US$12bn Sakhalin-I project with a 30% stake. which are estimated to contain up to 2. India's OVL (20%) and a consortium of Japanese companies JNOC. The Salym fields started commercial production in December 2005. Chayvo also © Business Monitor International Ltd Page 57 .

has previously favoured shipping the gas as LNG from the Sakhalin-II export terminal. a natural gas field with associated condensate.Russia Oil and Gas Competitive Intelligence Report 2010 produces gas. Delay in the budget approval forced Exxon to briefly halted work on the project in February 2009. No production estimates for the Odoptu fields have been released. on the other hand. Rising output volumes. In May 2010 Exxon said that the Odoptu field will increase output at Sakhalin-I by 30. Transneft – Summary State-owned Transneft is Russia’s oil pipeline monopoly. Progress at Sakhalin has been slower than expected owing to disagreements between Gazprom and Exxon over gas marketing rights.7% respectively. which formally began operations on February 18 2009 and which incorporates an oil field with associated gas. the government approved Transneft’s request to increase oil transportation tariffs by 15. which stretches 1. Transneft is also the largest shareholder (31%) in the 750. Exxon resumed work at Sakhalin-I after the energy ministry finally approved its US$2bn cost plan for that year. Exxon supports the construction of a pipeline to China. The company has argued the increases are necessary to maintain its infrastructure and finance new projects. the project will produce © Business Monitor International Ltd Page 58 .4% and 10. In 2008. with output expect to eventually reach 10bcm per year. a pipeline. Oil production from Odoptu will offset declining output from Chayvo.000b/d CPC system. present significant export potential. Once fully onstream. which runs from Russia through Belarus and Poland into Germany. In December 2008. Gazprom. and an LNG processing plant and export terminal. although more recently it has insisted the gas is needed to supply the domestic market to support industrial expansion in eastern Russia. The Odoptu Phase 1 development will utilise the existing midstream infrastructure connected to the Chayvo field. While this increase is lower than the 21% rise requested by Transneft.7% from 2009. the news will present another blow to Russian oil producers that are already exporting crude at a loss after paying export duties. transportation tariffs and taxes amid subdued oil prices. The Odoptu field is due onstream in H210. an option it has under the project's PSA.000km of long-distance pipelines. including the Druzhba (Friendship) line. Currently. consumption of Sakhalin-I's gas remains confined to the Khabarovsk region. operating some 50. however. Exxon announced in January 2010.505km from Tengiz in Kazakhstan to the Russian Black Sea port of Novorossiysk. It transports about 93% of Russia’s oil production. Transneft raised its oil shipping fees in January and August by 19. Sakhalin Energy – Summary Sakhalin Energy operates the Sakhalin-II project. In late-April 2009. particularly the ESPO. Crude from Odoptu will be sent by pipeline to the Russian mainland for export via the De-Kastri terminal in the Khabarovsk region.000b/d when it comes onstream in H210.

The first.5bcm and 55.5%) and Mitsui (10%). The most promising acreage in Sakhalin-IV was thought to be the West Schmidt Block.45bn for its majority stake.Russia Oil and Gas Competitive Intelligence Report 2010 9. The company has two major projects in Russia.000b/d of crude oil. again owing to poor commerciality. holds recoverable natural gas reserves of more than 600bcm. BP and Rosneft said that after evaluating extensive seismic data they decided not to proceed to the drilling phase. BP and Rosneft also relinquished the East Schmidt Block at Sakhalin-V. In March 2009. the US$3bn Yuzhno (South) Russkoe gas project. BP appears to have decided that the block holds little commercial prospects and in March 2009 abandoned the Sakhalin-IV project. when it launched a 49:51 JV with Rosneft to develop Sakhalin-IV and -V areas in the Sea of Okhotsk. BP has been active in Sakhalin since 2006. In February 2010. the Kaigansky-Vasuykanskiy (KG) Block. © Business Monitor International Ltd Page 59 . Mitsubishi (12. The JV.5% minus one share). Following extensive interpretation of seismic data.000b/d of condensate in 2009 and is expected to peak at 7. are put at 118mn bbl of oil and condensate (ABC1). It came onstream in July 2008 and produced around 1bcm and 6. BP – Summary BP's presence in Russia is now concentrated on the TNK-BP JV.000b/d of condensate. The partners drilled two deepwater wells at KG in 2006 and have been sufficiently encouraged by the results to shoot more seismic data in 2010 in preparation for further drilling. Roughly two-thirds of Sakhalin-II’s LNG exports will be exported to nine utilities in Japan. in which Gazprom and Wintershall are equal partners. Wintershall – Summary Wintershall is an upstream subsidiary of German chemical group BASF. The companies have a preliminary agreement in place to supply over 800bcm of gas to Europe to 2043 through BASF’s distribution arm Wingas. Two exploration wells were drilled at the Medved and Toiskaya structures in 2007 but both disappointed. any commercial discoveries at the KG block are most likely to be developed in conjunction with the Sakhalin-III project further south. As of December 2006 Sakhalin Energy is majority owned by Gazprom (50% plus one share) alongside former majority owner Shell (27. with the British major pulling out of the CPC pipeline consortium and significantly reducing its Sakhalin exposure.000tpa of LNG from Sakhalin-II from 2011 without disclosing the financial terms. dubbed the Kaigansko-Vasyukanskoye Sea field. Gazprom paid US$7.6mn tpa of LNG and around 900. and reach plateau production rate of 25bcm per annum in mid-2009. Estimated reserves at the only certified discovery at the block. has chosen to keep the other permit in the Sakhalin-V project. however. The project’s lifespan is put at over 40 years. with reserves estimated at up to 3bn bbl of oil and 255bcm of gas. The second project is the US$1bn Achimgaz JV in the YamalNenets region. With all synergy between Sakhalin-IV and Sakhalin-V now lost. while the remaining third goes to South Korea and North America. Osaka Gas signed an SPA to buy 200.

this exploration success may be the reason for OMV's decision to exit Russia. OMV – Summary Austria's OMV is looking to divest its Russian exploration assets and is talking to potential buyers. Gazprom has a call option to acquire a 50% plus one share stake. has disappointed after the Petrovskaya-1 exploration well came up dry in November 2009. Although Lundin currently holds a 70% interest in Laganskiy. Its Russian assets.500b/d of light sweet oil in one zone. Petrom reported its first Russian exploration success at the Lugovaya-1 well. through subsidiary Petrom's majorityowned Ring Oil Holding and Trading. Should the natural resources ministry's reserves estimate be accurate. It was the first © Business Monitor International Ltd Page 60 . The Petrovskaya structure. Lundin has also agreed a call option to acquire an additional 30% stake from remaining shareholder Gunvor. or 586mn bbl. Although the law provides for compensation of costs plus a 30%-50% 'premium. are eight exploration blocks in the region of Saratov and two blocks in the region of Komi. passed in May 2008.' the fact that licences are subject to state appropriation is a major risk and has contributed to negative investor perception of Russia. Well tests showed a flow rate of more than 2. Should both options be exercised.000boe/d of sweet gas and condensate. the state is empowered to take over oil exploration licences where recoverable reserves exceed 70mn tonnes (513mn bbl). Lundin would retain 50% minus one share in the block. although it did not specify the level of certainty attached to this estimate. known by its Russian acronym INK. located in Saratov's Kamenskiy licence. CEO Wolfgang Ruttenstorfer said on May 20 2010. however. According to Russian's law on strategic deposits. Russia's natural resources ministry said in October 2009 that reserves at the block could be as much as 80mn tonnes. Irkutsk Oil Company – Summary Irkutsk Oil Company. Ironically. which will test the western section of the discovery. where the October 2008 Morskaya discovery is estimated to hold 230mn boe of recoverable reserves. while two gas-bearing formations produced a combined 4. The contract extension will allow Lundin to delay the drilling of the Morskaya-2 appraisal well until 2010.Russia Oil and Gas Competitive Intelligence Report 2010 Lundin Petroleum – Summary Swedish independent Lundin Petroleum has interests in four production licences and one exploration licence in Russia. In August 2009. Its most prospective asset is the Laganskiy (Lagansky) Block in the Northern Caspian. leaving Gazprom 50% plus one share. which was estimated to hold reserves of up to 300mn bbl. an oil trader. was established in November 2000 by bringing together several small oil and gas producers in the Irkutsk region of East Siberia. the Kamenskiy licence would be subject to this law. In February 2009. Rosnedra extended Lundin’s exploration permit for the Laganskiy Block until August 2014.

In November 2009. Aladdin has invested a total of NOK375mn (US$66. Aladdin's future growth prospects will depend on the commercialisation of some of its other licences. PetroNeft – Summary London-listed PetroNeft was established in 2005 to develop assets in West Siberia. while the additional and potential prospects are estimated to hold 3P reserves of 253mn bbl and exploration resource reserves (4P) of 100mn bbl. with the price for Q409 set at RUB1. Gas and Metals National Corporation (JOGMEC) signed an agreement with INK to study the potential application of gas-to-liquids (GTL) technology at their joint projects. The technology would be applied at the Mogdinskiy Severniy. Trial production started in March 2010. According to consultants Ryder Scott.991sq km. On October 14. In October 2009 Aladdin signed an agreement with Gazprom’s subsidiary KomiRegionGaz to sell 46Mcm per annum for five years from its Middle Sediolskoe field in the Komi Republic. particularly the oil-bearing West Uthinskoye licence. In early December © Business Monitor International Ltd Page 61 . Aladdin Oil & Gas – Summary Oslo-listed Aladdin Oil & Gas was founded in 2006 and is solely focused on Russian exploration and production. Aladdin is hoping to produce 2. all in north-western Russia. the company announced that it was increasing its P2 reserve estimates for the Middle Sediolskoe field to 383Mcm.1% held by the European Bank for Reconstruction and Development (EBRD).Russia Oil and Gas Competitive Intelligence Report 2010 to bring onstream oil production in Irkutsk and remains the largest producer in the region.000boe/d. with 100%. The agreement formalises GTL plans announced by the INK chairman in September 2009. The licence is also located in the Tomsk region and contains two proven oil fields – Lineynoye and Tungolskoye – as well as around 25 additional prospective areas and further potential prospects that have been identified through seismic surveys. The company currently holds 11 oil and gas fields. West Uthinskoye and two licences in the Timan-Pechora Basin. the Lineynoye and Tungolskoye fields hold total proven. The gas price for deliveries will be adjustable.6mn bbl. There are several developments in the pipeline.650boe/d in Russia in 2010. state-run Japan Oil. INK has a strong focus on gas capture and is pursuing various policies to eliminate flaring at its fields. which are being developed by INK-Sever. Production in 2008 stood at 6. after three years of net losses. The company owns Licence 61. the company's 100%-owned Orneftegaz and Veselovskoe subsidiaries are exploring in the south of the country: at Bogdanovskoe in the pre-Caspian depression and in the Volga-Ural Basin. a 51:49 JV between INK and JOGMEC. probable and possible (3P) reserves of 70. The Sediolskoye supply deal will provide Aladdin the funds towards the development of its remaining licences. which should benefit from connection to the ESPO export pipeline.770/mcm (US$60/mcm). In addition. giving Aladdin a total of eight Russian licences. all operated by separate subsidiaries. According to Nedrelid. with 8. It holds four licences through its 100%-owned Geotechnologia subsidiary: Middle Sediolskoye. which covers an area of 4. The company appears to be owned by its management. Bolshetirskiy and Yaraktinskiy Zapadnyy blocks.9mn) in Russia since 2006.

the company had proven and probable (P2) reserves of 526mn bbl. It is targeting three drilling prospects. PetroNeft's three-year exploration programme will include the reprocessing of seismic and well data. Urals was forced to agree to divest to Sberbank its stakes in key Taas Yuriakh Neftegazodobycha and Dulisma operating units in mid-2009 as part of the loan repayment deal. However. Rosneft.700b/d. output of 42. Alliance's shareholders control 60% of the new entity and WSR's the remaining 40%. in what was at the time one of the largest deals by a Russian-based independent. the acquisition of 750km of new seismic data and the drilling of one well. and under the agreement the company can use the existing infrastructure at the two producing fields.000b/d and a retail network of 255 stations in eastern Russia. PetroVietnam is seeking government approval to invest US$614mn in an oil E&P JV with Zarubezhneft. PetroNeft announced plans to drill nine wells on the licence.5bn deal created a vertically integrated player with assets in Russia and Kazakhstan.72bn in 2008. is the company's second in the area. Revenues were down from US$2. Russia and Vietnam signed an agreement to deepen E&P cooperation in 2006. The licence. which are estimated to hold 55mn bbl of oil in place. The agreement was implemented through the award of the licences in Yamal-Nenets and also extends the life of the © Business Monitor International Ltd Page 62 . AIM-listed Urals Energy is a sizeable independent focused on East Siberia. while profits were up from US$45. PetroNeft was awarded the Ledovy licence in the Tomsk region. In December 2009. Alliance Oil – Summary Independent oil company West Siberian Resources (WSR) merged with Russia-focused mid-sized Alliance Oil in April 2008. the company reported revenues of US$1.97mn in the previous year.5% in Taas. Under the agreement. beating the only other bidder. Others – Summary Spanish major Repsol YPF is reportedly in talks with Rosneft about acquiring a 25% stake in the Sakhalin-III project. which covers 2. The US$2. In November 2007 Urals acquired a 35.73bn and net profit of US$345mn. following the collapse of a loan restructuring deal with Sberbank in the wake of the global financial crisis. As of end-2009. refining capacity of 70. with the first one scheduled to be spudded in April 2010. The partners were awarded four oil blocks in western Siberia in May 2008. During FY09. By early-2008 the company held P2 reserves of 822mn boe. The licence does not include two producing oil fields – Grushevoye and Lomovoye – that are located in the area.000b/d by 2013 is no longer feasible. to develop other discoveries. The company’s future now looks uncertain with a hostile takeover or liquidation being a large threat. However. Ural’s aim to raise output to 75.Russia Oil and Gas Competitive Intelligence Report 2010 2009. including the Vasyugan-Raskino oil pipeline. PetroNeft believes that two undeveloped discoveries – Ledovoye and Sklonavaya – have significant potential. Its shares were suspended from AIM in July 2009.447sq km.

Western Siberia-focused independent Exillon Energy launched a successful US$100mn IPO on AIM in December 2009. Exillon believes the assets hold significant upside potential and is seeking to raise funds for their development through an IPO. The Japanese companies already hold 10% and 12. AIM-listed Matra Petroleum spudded its first appraisal well at the Sokolovskoe field in the Arkhangelovskoe licence in the Orenburg region of the Urals.457b/d within five to seven years. making it the first share offering by a Russian oil producer since the start of the financial crisis in mid-2008.365-100. which is registered in the Isle of Man and headquartered in Dubai. The A-13 well is estimated to cost around US$4. In October 2009. Exillon. © Business Monitor International Ltd Page 63 .5mn and is expected to be completed by the end of February 2010. N3 and N4 in Nenets. Zarubezhneft. again mirroring a sister JV in Vietnam. which operates another five fields in Khanty-Mansiysk. will provide the remainder of the capital.25bn JV. which will explore blocks N1.5% stakes respectively in the adjacent Sakhalin-II project. which supplies LNG to Japan. N2. the partners were planning to start drilling at the fields by end-2008 and expect to produce 80. According to Zarubezhneft. the 49:51 Gazpromviet. The Exillon WS and TP fields were discovered in 1971 and 1988 respectively and are both producing an unspecified small amount of light oil. The new JV will jointly develop the Nagumanov field in the Urals region. acquired its first assets in early 2009. Japan's Mitsubishi and Mitsui are interested in acquiring stakes in the Sakhalin-III project in Russia's Far East. receiving permits for 10 oil fields in north-western Siberia.Russia Oil and Gas Competitive Intelligence Report 2010 companies' first JV. Their intention to farm in to the Gazprom-led Sakhalin-III development is therefore believed to be motivated by the expected cost synergies with Sakhalin-II and a desire to secure additional gas supplies. PetroVietnam also established a gas partnership with Gazprom. which controls a 51% stake in the JV. which operates five fields in the Timan-Pechora Basin in the Komi Republic and Exillon WS. In December 2009. PetroVietnam would have a 49% stake in the US$1. The blocks currently consist of 13 fields and hold estimated oil reserves of around 572mn bbl. Its operations are split between two subsidiaries: Exillon TP. according to a report in Japanese newspaper Yomiuri Shimbun citing unnamed industry sources. Vietnam-based Vietsovpetro. Despite the fields' long production history.

According to the government's energy strategy.55mn b/d. The collapse of the Soviet Union initially precipitated a dramatic decline in energy generation.302bcm (BP data) account for more than 30% of the world total.0% growth over the period. representing 17. plus 31 nuclear reactors. © Business Monitor International Ltd Page 64 .15mn b/d. Total crude distillation capacity is around 5. Russia's power sector includes more than 440 thermal and hydro-power plants (approximately 80 of the former are coal-fired).7% by 2014. oil production was around 11.Russia Oil and Gas Competitive Intelligence Report 2010 Market Attractiveness Analysis Russia Energy Market Overview The June 2009 BP Statistical Review of World Energy attributes 79. Poor management during the Soviet era and a sharp decline in demand during the early 1990s undermined the coal industry. and Russia meets 22% of the world's gas demand. (down 18% between 1992 and 1999). Gas reserves of 43. Russia's adherence to the stipulations of the Kyoto Protocol may lower utility sector demand for coal. the end-2009 Oil & Gas Journal (OGJ) annual survey suggests just 60bn bbl.0bn bbl of proven oil reserves to Russia.3% share of PED. There are 42 oil refineries in Russia. He noted that the region had already seen almost 200 rivers ruined after being used for mining activities. followed by a gradual recovery (up 18% between 2000 and 2009). many of which are incapable of meeting modern fuel standards. These environmental problems may hinder Russia's desire to keep increasing coal production. Russia should produce more than 400mn tonnes by 2020. After a slight decline in 2002. meaning that price increases as part of a deregulation programme could make gas too costly for much of the Russian population.2% of 2009 primary energy demand (PED).3%. voiced concerns over the region's ability to sustain coal production growth. which is a possibly conservative total that still represents almost 7% of the world's oil. coal at 14. while there appears to be significant reserves potential in its share of the Caspian Sea. A few generators in the far-eastern part of the country are not connected to the power grid.543mn toe by 2014. Large parts of Russia are under-explored. production rebounded in 2003-2008. With 157bn tonnes of proven coal reserves. accounting for an estimated 56. The system has a total electric generation capacity of almost 216 gigawatts (GW). In a December 2008 BBC interview. with 2009 generation at an estimated 984TWh. Regional energy demand is forecast to reach 1. It is followed by oil at 18. Russia's estimated 2009 market share of 50. Russia ranks second in the world behind the US.4%. the governor of the Kemerovo region.6% and nuclear with a 5. which is responsible for over half of the country's coal production. Gas is the dominant fuel in Russia. with 2008 output of 327mn tonnes.6% of the world's total at an estimated 10. hydro at 5. In 2009. However.4% is set to fall to 49. State gas monopoly Gazprom provides subsidised gas to the power industry through a deal with former monopoly supplier Unified Energy System (UES).

The port sent its first cargo to Hong Kong. However. although on a different timeframe. began operations in December 2009. but Kozmino will receive oil delivered by rail from Skovorodino until the second phase has been completed.Russia Oil and Gas Competitive Intelligence Report 2010 The Russian government has stated that it intends to expand the role of nuclear and hydro-power generation in the future to allow for greater export of fossil fuels. Russia has an installed nuclear capacity of more than 21GW. It is transported to Kozmino from the Meget railway terminal. Half of the country's nuclear reactors use the RBMK design employed in Ukraine's ill-fated Chernobyl plant. and meeting this target will require between US$5bn and US$10bn per year of investment over the next decade. Kozmino terminal. Russia phased out Euro-2 standard fuels in 2008 and hopes to phase out Euro-3 by the end of 2009. This means that while upgrades to facilities are particularly important when the refined products are destined for export to the EU. In Europe. all west of the Ural Mountains. many plants are due for decommissioning. Euro4 is expected to be allowed until 2013. The proposal would also allow any of the subsidiaries of the two © Business Monitor International Ltd Page 65 . both Gazprom and Rosneft would be allowed to share access with their subsidiaries and could farm out a stake of up to 50% in offshore projects to foreign companies. Euro-5 has already been introduced for most vehicles and Euro-6 is slated for implementation in 2014/2015 for all vehicles. The oil exported via Kozmino port is sourced from East Siberia.and nine of Russia's plants are between 26 and 30 years old. more than double the 2003 level. in the Irkutsk region. Under a plan drafted by the ministry. published in March 2010. Donskoy claimed that the Natural Resources and Environment Ministry believes the two companies have insufficient resources to develop Russia's continental shelf on their own. From there it is sent to the Skovorodino oil terminal. even fuels used in Russia will need to meet higher quality standards. which started operations in October 2009. which is operated by national oil midstream monopoly Transneft. Russia's newest crude oil export terminal. which cited deputy energy minister Sergei Donskoy. with a further six approaching 25 years of age. According to the report. In the Moscow Times article. the proposal would allow subsidiaries of the two companies to join them in offshore exploration and could lead to international oil companies (IOCs) also becoming involved. The Russian Ministry of Atomic Energy predicts that by 2020 nuclear generation could reach 300TWh. However. Russia's nuclear power facilities are ageing. Russia may relax rules limiting offshore exploration and production (E&P) in the country to Rosneft and Gazprom. distributed across 31 operational nuclear reactors at 10 locations. according to a report by the Moscow Times newspaper. the port of Kozmino. The Skovorodino oil terminal is the end point of Phase 1 of the ESPO pipeline. Russia has adopted the European Emissions Standards for fuels. which is due to be completed in 2014-15. is intended to be the terminus of the Eastern Siberia-Pacific Ocean (ESPO) pipeline. The working life of a reactor is considered to be 30 years -.

frequent pipeline incidents and the capriciousness of the Russian weather. which is most acute in the poorer Former Soviet Union (FSU) countries that now serve as transit states on the way to the EU. The Kremlin sees Asia the future source of export growth. Jim Mulva. According to the Moscow Times. preventing other Russian and international companies from participating.4bn (US$1. In addition. Under legislation passed in 2008. offshore fields in Russia can only be developed by companies in which the government owns a stake of 50% or greater. the CEO of ConocoPhillips. In 2008. The country has an extensive gas export pipeline network bound for the western markets. the two companies invested only RUR56. has slowed the development of these areas. thanks to pricing disputes with transit states such as Ukraine. Some of the infrastructure. © Business Monitor International Ltd Page 66 . but gas pipeline projects to the east of the Ural Mountains remain in the planning stages. however. it could therefore present significant opportunities to IOCs. The newspaper reported. gain greater security of transport and maintain a closer grip on ex-communist states.Russia Oil and Gas Competitive Intelligence Report 2010 companies to develop offshore fields on their own or in partnership with other companies. In order to diversify its export routes. however. effectively limiting participation to Gazprom and Rosneft. has fallen into considerable disrepair. If the ministry proposal is accepted. The fact that offshore projects are effectively limited to just two state companies.9bn at current rates) in E&P offshore Russia. a rate which Donskoy claimed would mean ministry targets for offshore areas would take 165 years to fulfil. claimed in March 2010 that the legally-privileged position of Gazprom and Rosneft had led to slower growth for their privatelyowned rival Lukoil. Russia is the major gas exporter to Europe but the reliability of its supplies in the past few years been causing concern. in which Conoco holds a 20% stake (which it is reducing to 10%). that it is unclear whether the proposal has been submitted to the Russian cabinet. It is arguable that this has damaged Russian investment in offshore areas. companies applying to work on the fields must have a five-year record of working on such projects. Russia has been looking to construct new pipelines bypassing Eastern Europe.

Other major companies involved in refining include Gazprom Neft with 964. the country’s largest players such as Rosneft have invested in upgrading their facilities to meet stringent fuels quality standards. which can produce the company’s polymer-modified TNK Alfabit brand of premium bitumen. further to the west. Reports in October 2009 © Business Monitor International Ltd Page 67 . The country’s major refining centre is in the VolgaUrals regions around the Republics of Tatarstan and Bashkiria. Komsomolsk Refinery: Rosneft’s Komsomolsk refinery in Russia’s Far East is supplied with crude oil by rail from Western Siberia. in partnership with Surgutneftegaz. introducing Euro4 standards at the start of 2010 and preparing for the introduction of Euro-5 standards at the start of 2014. over 2. Planned Additional Capacity: In June 2007. Samara and.000b/d of Russian capacity. Rosneft is the largest player in the Russian refining sector.62mn b/d in 2009 according to the BP Statistical Review. the company is investing US$150mn in the construction of an isomerisation unit at the plant.000b/d plant near the port of Primorsk in Russia’s Far East. Russia has also followed suit in mandating cleaner fuels. a total capacity of 1.13mn b/d and a market share of nearly 21%. with seven major refineries. Rosneft CEO Sergei Bogdanchikov announced plans to expand the company's refining capacity ninefold by 2015. Yaroslavl. TNK-BP looks likely to increase investment at the plant. Almost all refiners in Russia also control upstream assets. allowing companies to supply their own refineries through Transneft’s pipeline systems. particularly diesel. There are also several slightly smaller refiners such as Surgutneftegaz. South Korea and Vietnam via the Nakhodka tanker terminal and the Vanino tanker terminal.Russia Oil and Gas Competitive Intelligence Report 2010 Oil & Gas Infrastructure Oil Refineries With a total processing capacity of 5. with a nameplate capacity of 340. Large refining cities include Ufa. allowing many companies to export refined products. to the EU. Bashneftekhim and Tatneft. The few companies that do not have upstream involvement generally operate plants of less than 50. as well as a small number of companies operating individual plants.000km away. Refineries in Russia are mostly located west of the Urals. the capital of Bashkiria. Russia is the world’s third largest refiner after the US and China.000b/d.000b/d (16%) and TNK-BP with 560.000b/d (18%). a category that together accounts for around 115. Lukoil with 894. Although the vast majority of this capacity dates from Soviet times. although significant capacity exists in Siberia – particularly West Siberia – along major pipelines.000b/d.000b/d (10%). Following the introduction of tighter regulation regarding the lifecycle of road bitumen in 2010. Rosneft is currently upgrading its Tuapse and Komsomolsk refineries and said in 2008 that it was looking into constructing a new 240. As part of its wider downstream expansion plans. Ryazan Refinery: TNK-BP’s Ryazan facility is the company’s largest and most up-to-date refinery. The motor and jet fuels produced by the refinery are currently exported to Japan. as well as by pipeline from Sakhalin from Rosneft subsidiary Sakhalinmorneftegaz.

Russia Oil and Gas Competitive Intelligence Report 2010 suggested that the company was considering developing a 400. © Business Monitor International Ltd Page 68 .000b/d refinery in the Primorskiy region with China’s Sinopec. New generation plants making products compatible with European standards allow the company to export any surplus and position it well for the eventual tightening of transport pollution emissions in Russia.

387 130.176 359.000b/d 1954 1951 1942 1982 1934 1945 1935 1934 Uses Rosneft crudes 2002 1929 Specialises in motor fuels 1998 15 sub-50.300 160.142 242.585 132.200 168.000b/d Capacity Or Greater In Russia Refinery Angarsk Kstovo Ryazan Kirishi (Kinef) Yaroslavl (Yanos) Omsk Novo Ufa Perm Moscow Ufa Syzran Volgograd Ufaneftekhim Salavat Novokubishevsk Komsomolsk Achinsk Cracking Saratov Samara-Kubishev Orsk Saratov Ukhta Nizhnekamsk Tuapse Khabarovsk Nizhnevartovsk Others Total Capacity Planned Additional Capacity Primorsk Capacity (b/d) 385.594 130.540 Owner (Contractor) Rosneft Lukoil TNK BP Surgutneftegaz Slavneft Gazprom Neft Bashneftekhim Lukoil Sibir Energy Bashneftekhim Rosneft Lukoil Bashneftekhim Gazprom Rosneft Rosneft Rosneft Sidanco Rosneft TNK BP TNK BP Lukoil Tatneft Rosneft Alyans Group TNK BP - Completed 1955 1958 1960 1966 Details Uses West Siberian Crude 1955 1951 1958 1938 1937 1942 1957 Operating at 200.640 134.076 200.Russia Oil and Gas Competitive Intelligence Report 2010 Table: Refineries Of 50.657 140.468 94.423.200 340.000b/d refineries - 240.000 184.518 120.000 126.962 214.000 115.000 84.971 5.000 335.995 234.493 104.000 279.000 Rosneft 2014 With Surgutneftegaz Source: BMI © Business Monitor International Ltd Page 69 .000 286.900 290.720 146.160 285.

The Kozmino terminal. Once the ESPO pipeline is extended to Kozmino. Surgutneftegaz and TNK-BP. Transneft’s ESPO will be the first Russian pipeline © Business Monitor International Ltd Page 70 . According to the EIA. The terminal exports refined products as well as crude. which is due to be completed in 2014-15. The port will provide an outlet to oil producers in East Siberia. although it claims export capacity of around 3mn b/d. which is operated by national oil midstream monopoly Transneft. according to ESPO's website. Kozmino Russia's newest crude oil export terminal.700-35. was completed in 2001 and exports around 1. with Transnefteproduct beginning shipments in 2008. the port of Kozmino. The Pacific port of Kozmino was completed in December 2009. Additional export capacity is located at the Black Sea port of Novorossiysk.Russia Oil and Gas Competitive Intelligence Report 2010 Oil Terminals/Ports The country's biggest Baltic Sea port is located in Primorsk. Novorossiysk The port of Novorossiysk is Russia’s main Black Sea port for oil. near St Petersburg. Transneft claimed that two plans had been developed to reduce or cease oil exports via the Bosphorus in order to provide customers for the Samsun-Ceyhan oil pipeline. underlining its focus on catering for Asian demand. In June 2010. with additional ports in St. it offers links to the main regional consumers: Japan. the port will play a major role in Russia's energy export sector. Oil Pipelines East Siberia Pacific Ocean (ESPO) Once completed. to become Russia's third largest oil export facility.5mn b/d. Russia’s second largest oil export facility. Primorsk Primorsk. which started operations in October 2009. around 1mn b/d of Russian crude is exported via the Black Sea (mainly through Novorossiysk). making it the world’s longest oil pipeline. exporting Russian crude and oil delivered by pipeline from Kazakhstan and Azerbaijan. the 4. South Korea and China. Kozmino exports East Siberian crude that is transported from the Meget railway terminal in the Irkutsk region to the Skovorodino oil terminal. Each railway oil cargo will hold 4.800 tonnes (33. then sent through the Bosphorus to the Mediterranean.200bbl). began operations in December 2009. Petersburg and Vysotsk.700km ESPO pipeline will overtake the Europe-bound Druzhba (Friendship). The port of Kozmino is a vital part of Russia's Asia Pacific economic strategy.6004. Located in the Sea of Japan. according to the EIA. The Skovorodino oil terminal is the endpoint of Phase 1 of the ESPO pipeline. but Kozmino will receive oil delivered by rail from Skovorodino until the second phase has been completed. is intended to be the terminus of the Eastern Siberia-Pacific Ocean (ESPO) pipeline. including Rosneft. The port sent its first cargo to Hong Kong.

environmental concerns and price disputes. The first section of the pipeline had to be moved to 400km away from the ecologically sensitive Lake Baikal. Until ESPO Phase 2 comes online. From Skovorodino. TNKBP and Surgutneftegaz from untapped fields in East Siberia. where it will connect with the 927km Chinese section of the spur.Russia Oil and Gas Competitive Intelligence Report 2010 transporting oil to Asia. ESPO will be supplied primarily by Russian oil companies Rosneft. It is hoped that this will allow Russia to replace dwindling output from West Siberia.000b/d. ESPO is being built in two stages. Construction of a second phase of the network. Purpe-Samotlor Transneft began constructing a new major link from the Yamal Autonomous District in March 2009. started in June 2009. On August 29 2010. The new link will cut about 100km from Vankor's route to ESPO trunkline. whose construction was completed in June 2010. oil from Skovorodino is transported by rail to the Pacific port of Kozmino for export. it will benefit TNK-BP's Suzun. The link will cost US$1. ESPO will branch out to China. The second leg of ESPO will cover 2. The 70km pipeline will run to the Chinese border. The pipeline is expected onstream by October 31 2010. Tagul and Russkoe field developments on the Yamal peninsula. The pipeline has experienced serious delays due to construction difficulties. but received a much-needed boost from a US$10bn Chinese loan in February 2009. known as BPS-2.000b/d in 2011-2030. Vladimir Putin officially inaugurated the Russian section of the ESPO pipeline spur from Skovorodino to the Chinese city of Daqing. As well as providing transit capacity for further expansion at Vankor.757km stage will link Taishet in the Irkutsk region to Skovorodino in the Amur region and has capacity of 600.000b/d from 2011. The pipelines transport oil from West Siberia and the far north of the country to the Baltic Sea terminal of Primorsk. The pipeline was designed to expand the existing © Business Monitor International Ltd Page 71 . and will supply CNPC with 300. which could be expanded at a later date. via a 70km connector. Initial capacity will be 500. The first 2. The Purpe-Samotlor pipeline will replace the longer and smaller-diameter lines for transporting Vankor crude.100km from Skovorodino to Kozmino on the Pacific and will increase the capacity of the entire pipeline to 1. The second phase is not expected to be completed until 2014/2015.000b/d. The 430km Purpe-Samotlor pipeline will provide a better export route from crude volumes from the giant Vankor oil field and will speed up the development of other deposits in the Yamal and north-western Krasnoyarsk regions. missing the end-2008 deadline by a year and coming online in late-2009.6mn b/d.34bn and is due to be commissioned in 2012. The pipeline system began operations in 2001 and reached its full design capacity in 2006. which will supply northern China with 300. Baltic Pipeline System The Baltic Pipeline System (BPS) has two phases: BPS-1 and BPS-2. The pipeline will run from the village of Purpe to the Samotlor oil field in the Khanty-Mansiysk region further south.

The most advanced project is the offshore Shtokman field. A spur known as the Northern Druzhba continues north through Belarus and Lithuania where it formerly supplied the Novopolotsk and Orlen Lietuva (Mažeikių) refineries and the Ventspils and Butinge oil terminals. The pipeline runs west to Unecha in Bryansk Province where it splits into two. Once the BPS-2 pipeline becomes operational. which will supply pipeline gas to Europe and LNG to Europe and North America. with Spain a likely buyer. Shtokman LNG (Planned) © Business Monitor International Ltd Page 72 . The construction of the new pipeline demonstrates Russia's strategy of diversifying its oil and gas export infrastructure. has estimated costs of US$30bn. A consortium led by Norway’s Aker Solutions won the EUR25mn FEED contract for the floating production unit (FPU) at Shtokman in February 2009. The presence of a large number of transit countries has led to risks of disruption to supply.016km-long BPS-2 pipeline will transport some 1mn b/d of oil from Unecha. Western Druzhba crosses Poland and then runs into Germany. bypassing its traditional transit countries – Belarus. The 1. which has been in dispute with Russia over energy imports several times. was completed in 1964 and currently has a capacity of around 1. which is being developed by Gazprom in partnership with French major Total and Norway’s Statoil. Russia is likely to reduce supplies through the Druzhba oil pipeline.9bn. which was involved in oil transit disputes with Russia in 2006 and 2010. The main Druzhba pipeline continues to Mozyr in Belarus. The Northern Druzhba pipeline was closed in 2006 when Russia claimed it had been damaged. The project. and the 1.2mn b/d Southern Druzhba. whose positions will be weakened as the new pipeline allows Russia to supply more oil directly to Western Europe. The Russian section of the pipeline begins in the Republic of Tatarstan. came onstream in March 2009. Poland and Ukraine. The second major area for LNG is the Barents Sea and the Yamal-Nenets Autonomous Region. The construction of the pipeline is expected to be completed in 2012 at a cost of around US$3. Some 70-80% of the LNG will be sold under long-term contracts. Sakhalin-II. to Ust-Luga and from there the crude will be transported on by tanker.4mn b/d. while Southern Druzhba leads into Ukraine and from there into central and south-eastern Europe.Russia Oil and Gas Competitive Intelligence Report 2010 system and bypass Belarus. close to the border with Belarus. LNG Terminals Sakhalin-II Russia’s first LNG export terminal. Druzhba The Druzhba pipeline. Italy’s Technip is undertaking the FEED for the onshore gas facilities including the LNG plant. The pipeline's construction was not welcomed by these transit countries. one of Russia’s main oil export routes. where it splits into the Western Druzhba. It has not yet been repaired. which serves as a gathering point for oil from other regions and from Kazakhstan. with a capacity of up to 1mn b/d. particularly in Belarus.

The investment decision will be made in March 2011 and a decision on the gas liquefaction plans will be made by the end of the same year. a JV between Gazprom and Novatek. The plant would commercialise gas reserves at the Kumzhinskoe and Korovinskoe fields in the Timan-Pechora Basin. Yamal LNG (Planned) Yamal LNG. The plant. France's Total has 25% and Gazprom the remaining 51%. though the facility is expected to have a liquefaction capacity of 6. Novatek is the operator of the South (Yuzhno)-Tambeyskoe gas field onshore the Yamal-Nenets region. Shtokman is believed to be the biggest undeveloped offshore gas field in the world. First gas is expected to be exported via pipeline to Europe in 2013. however. is the operator of the LNG project aiming to commercialise the Tambeyskoe group of fields. dubbed Pechora LNG. A number of IOCs as well as the government of Qatar have made overtures to Novatek about joining the Yamal LNG scheme. First deliveries could come as early as 2017. Through its controlling stake in the Yamal LNG operating vehicle. and an FID is due in 2011. Novatek is in no hurry to bring a foreign partner into the project. The field is being developed by SDC.Russia Oil and Gas Competitive Intelligence Report 2010 With an estimated 3. the company's CEO told Reuters in a July 8 interview. Gas produced in the third development phase of the Shtokman gas field will be exported solely as LNG. according to the report. Few details of the plan have been disclosed.6mn tpa and is expected onstream in Q415. stated in December 2009. Gazprom has previously said that it aims to start producing the first 15bcm of gas in Yamal by 2011 and then to gradually boost volumes to an ambitious 250bcm per year. Novatek and its minority partner Gazprom. in which Norway's Statoil holds a 24% stake. Pechora LNG (Planned) Russian investment company Alltech Group is considering building an LNG export plant in the Nenets district. the licence for which Alltech acquired in 2007. with LNG exports to follow in 2014. have so far resisted bringing in such a partner. would have an initial capacity of 2. Increasing the proportion of gas that is exported in the form of LNG will provide more export options. CH-Oil & Gaz.2tcm of gas reserves. According to the Nikkei report. while about half the gas produced at the field during phases one and two will be exported via pipelines and half as LNG. an official agreement on construction of the plant is expected to be signed when Russian president Dmitry Medvedev attends the Asia-Pacific Economic Cooperation (APEC) summit in Tokyo in November. It is as yet unclear where gas for the project will be sourced. which will be delivered by pipeline from eastern Russia.9bcm. Alltech’s oil arm. Although no firm project timetable has been set. Vladivostock LNG (Planned) The Japanese and Russian governments have signed a preliminary agreement to build an LNG export terminal in Vladivostok. which is expected to begin exporting gas by around 2018. according to a July 10 Nikkei report. © Business Monitor International Ltd Page 73 . Total announced in May 2010 that its plans for the development of the Shtokman natural gas field in the Barents Sea in Russia are on course.

Putin said Israel is now likely to be excluded from the Blue Stream II project. It is the world's deepest underwater pipeline system and reaches a maximum depth of 2. The pipelines were completed in 2004 and were officially inaugurated in 2005. Lebanon. while Turkey agreed to let the pipeline pass under its territorial waters in return for a transit fee in August 2009. South Stream Emboldened by Blue Stream’s success. creating separate JVs between Gazprom and the countries’ gas distribution companies. Blue Stream is a JV between Gazprom and Italy’s Eni. In February 2006. In Bulgaria. Speaking during an official visit to Turkey in June 2010. making an extension of the pipeline to Israel unnecessary. Putin said that gas discoveries in recent years in Israel have reduced the country's future gas import projections. and a southern route crossing the Balkan Peninsula to Italy. since when they have been gradually ramped up to their maximum capacity of 16bcm per annum. © Business Monitor International Ltd Page 74 . the pipeline will split into a northern route going to Austria via Romania and Hungary.150m below the surface of the Black Sea. Greece. The northern route passes through the same countries as the 30bcm Nabucco pipeline from Turkey to Austria. Government officials of Bulgaria. Austria now remains the last country on South Stream's preliminary route yet to sign up for the project. Italy and Russia met in May 2009 to sign transit agreements for South Stream. which carries gas directly to Turkey under the Black Sea. The 385km subsea sections of the pipelines run from the Beregovaya compressor station in Russia to a gas terminal outside the Turkish port of Samsun. which the EU is promoting in order to reduce dependence on Russia. These JVs will be responsible for the design. however. in November 2007 Gazprom and Eni agreed to construct a new trans-European gas pipeline that will cost the companies EUR10bn by the time it comes onstream in 2013/14. There has since been much talk of expanding the pipeline both geographically and in terms of capacity. A deal between Gazprom and Eni has been signed under which the two companies have agreed to double the pipeline's capacity to 63bcm.Russia Oil and Gas Competitive Intelligence Report 2010 Gas Pipelines Blue Stream Russia’s first post-Soviet westbound pipeline system is Blue Stream. Slovenia joined the project later that year.213km from southern Russia to Ankara in Turkey. The 900km South Stream pipeline is routed via the Black Sea to south-eastern Europe. The US$3. Israel and Cyprus in a project known as Blue Stream II. construction and operation of the pipeline within their respective territories.4bn system consists of two pipelines that run for 1. including branches to Italy and the Middle East. Turkish energy ministry officials claimed that talks were under way between Gazprom and Turkish state-run gas distributor Botaş about extending the pipeline through Turkey to Syria.

In December 2008. Putin.Russia Oil and Gas Competitive Intelligence Report 2010 The South Stream was originally a 50:50 JV between Gazprom and Eni.ON Ruhrgas and Wintershall. and later Dutch entrant Gasunie with 9%. Construction of the onshore segment began in 2005 and was completed by early-2010. state-run Korea Gas (Kogas) announced its intention to team up with Gazprom to build an undersea gas pipeline from Russia if plans for an overland transit through North Korea fail. The second 27. rising costs. In April 2010. Gazprom and Eni. in the pipeline project. the head of foreign projects at Russia's state-run Gazprom. however. there were now no expectations of further delays to the project. French energy group GDF Suez signalled its intention to participate in Nord Stream as a minority partner.200km pipeline is designed to carry an eventual 55bcm annually under the Baltic Sea from Vyborg to Greifswald in Germany. Two potential gas pipeline options between Russia and South Korea are on the table: an overland pipeline via North Korea and a direct undersea pipeline. told industry data provider Platts in April 2010. 20% stake. Petersburg International Economic Forum in June. In November 2008. At its start-up in 2011. Nord Stream Russia’s second major export pipeline project is Nord Stream. according to a report by The Moscow Times. while construction of the underwater segment stalled owing to ongoing environmental concerns.5bcm phase is planned to come onstream in 2012. Under the agreement. Putin confirmed that the main terms for the admission of EdF to the project had been completed and that South Stream was on course for start-up in H215. GDF Suez is expected to receive 4. EdF can buy as much as 6bcm per year. The decision was announced following discussions between Vladimir Putin and his Italian counterpart Silvio Berlusconi on April 26. Russia-South Korea Gas Interconnector South Korea and Russia are expected to begin a new round of talks on a gas interconnector between the countries. With the erratic Pyongyang government under Kim Jong-il announcing periodically that it will © Business Monitor International Ltd Page 75 . The project. The 1. Finland and Denmark.5% each from Nord Stream's two German partners. securing final approvals from transit states Sweden. EdF was awarded a larger.5bcm. the partners are hoping to take a FID on the project in 2010. but France’s EdF signed an MoU to take a 10% stake in November 2009. the pipeline will have a capacity of 27. technical obstacles and political objections from neighbouring states. each with 20%. Following the finalisation of the contracts. After more than a year of negotiations. added that a partnership deal would be signed between EdF. The undersea construction is now set to begin on April 1 2010. The project is 51% owned by Gazprom along with German partners E. who declared the granting of a 20% stake to EdF. Gazprom and Eni during the St. He also said that following the signing of agreements with the Austrian government and oil company OMV on April 24. The 20% stake is to be taken equally from the two existing South Stream project partners. Stanislav Tsygankov. under a letter of intent (LoI) signed in March 2010. made major breakthroughs in late-2009. The first option suffers from severe geopolitical risks while the second option presents formidable technological and financial challenges.

the latter option seems unfeasible. © Business Monitor International Ltd Page 76 .Russia Oil and Gas Competitive Intelligence Report 2010 end all political and military agreements with Seoul. despite the north's opportunity to earn up to US$100mn a year in transit fees.

the central bank's efforts to restructure the sector could destabilise it further. Nevertheless. the benefits of its immense natural resources wealth and large and rapidly growing domestic market are significant incentives for potential foreign direct investors. Given very low confidence in the domestic banking industry. the worst-case scenario of a reversal of the 1990s privatisations appears unlikely. Weaknesses Opportunities Threats © Business Monitor International Ltd Page 77 . State influence over business is on the rise. Despite Russia's poor investment image in the West. Most recently. with many foreign investors put off by poor legal safeguards. The government has made fighting corruption a key priority and we expect sweeping legislative changes to significantly enhance the capacity of corruption fighting institutions in the medium term. and the Kremlin's apparently politically motivated campaign against foreign oil firms. has made Russia a much more attractive place to do business. foreign operators in the energy sector have come under pressure to allow state-owned firms greater involvement in their projects. combined with significant reductions in personal and corporate income tax rates.Russia Oil and Gas Competitive Intelligence Report 2010 SWOT Analysis Russia Business Environment SWOT Strengths The post-1998-crisis economic rebound. high levels of bureaucracy and corruption. The operating environment remains hazardous on a number of fronts.

while Romania and Ukraine are closely matched just above the middle of the league table. Gas output is forecast to fall by 18% in Romania. but should be able to stay in front of Slovenia and Uzbekistan. is a challenger for Poland's position. but rise 55% in Azerbaijan. we hope. while oil demand growth ranges from 6% to 31% across the region. Kazakhstan's moves to take a bigger share of the Kashagan project and to modify licensing laws are. with the lowest-ranked country having 68% of the score allocated to the highest-ranked. with a composite upstream and downstream score of 43 points out of the 100 available. including the new EU member states. There has been widespread privatisation progress in the EU states. Kazakhstan and Azerbaijan continue to dominate the top of the regional league table.Russia Oil and Gas Competitive Intelligence Report 2010 Risk-Reward Ratings Business Environment Ratings Central/Eastern Europe Region The CEE region comprises 15 countries. but far less movement in the other key states. included for the first time. Composite Scores Composite Business Environment scores are calculated using the average of individual Upstream and Downstream ratings. but with no immediate chance of catching the two main Central Asian energy powerhouse states. ahead of Hungary and the Czech Republic with limited upstream resource potential. Slovenia and Uzbekistan now share the final place in the rankings. Russia now shares third place with Poland. Oil production growth for the period to 2014 ranges from a negative 27% for Croatia to a positive 56% in Turkmenistan. The points spread in the CEE region is considerably narrower than elsewhere. an isolated example. depending partly on market maturity and EU membership. Russia and the four leading Central Asian hydrocarbons producers. taking first and second places with respective scores of 63 and 61 points out of a possible 100. The range for forecast gas consumption growth is from 10% to 81%. Slovakia and Croatia are struggling near the foot of the table. and is arguably increasing in both Russia and Kazakhstan. although Russian tax tweaks. State influence remains very high. © Business Monitor International Ltd Page 78 . The political and economic environment varies. environmental claims and attempted asset re-nationalisation have undermined its already unattractive licensing and regulatory regime. Turkey.

Scores are out of 100 for all categories.Russia Oil and Gas Competitive Intelligence Report 2010 Table: Regional Composite Business Environment Rating Upstream Rating Kazakhstan Azerbaijan Poland Russia Turkey Romania Ukraine Czech Republic Hungary Bulgaria Turkmenistan Croatia Slovakia Uzbekistan Slovenia 73 70 56 53 53 51 44 46 46 56 46 46 45 46 41 Downstream Rating 53 52 58 60 59 53 57 53 49 36 44 43 42 41 44 Composite Rating 63 61 57 57 56 52 51 49 48 46 45 45 44 43 43 Rank 1 2 3= 3= 5 6 7 8 9 10 11= 11= 13 14= 14= Source: BMI. with 100 the highest. © Business Monitor International Ltd Page 79 .

© Business Monitor International Ltd Page 80 . which have a 65% and 35% weighting respectively and are based on a subjective evaluation of licensing terms and liberalisation (Market) and the industry's broader Country Risk exposure (Country). subject to an improved country risk and licensing/regulatory environment. Long term. The 'Risks' rating comprises Market Risks and Country Risk. Uzbekistan has also mounted a successful challenge for mid-table status. Russia should be able to move higher. For a list of the data/indicators used. ahead of Turkey and Russia in joint fifth place. and should be able to keep clear of bottom-ranked Slovenia. having caught up with Croatia and Hungary to share eighth place. and is designed to enable clients to consider each rating individually or as a composite. Table: Regional Upstream Business Environment Rating Limits of Potential Returns Upstream Market Kazakhstan Azerbaijan Bulgaria Poland Turkey Russia Romania Hungary Croatia Turkmenistan Uzbekistan Czech Republic Slovakia Ukraine Slovenia 80 69 61 38 41 71 43 24 29 71 43 28 24 43 28 Country Structure 75 85 50 80 65 30 55 80 55 45 40 70 70 50 60 Limits 79 73 58 48 47 61 46 38 35 65 42 38 35 44 36 Risks to the Realisation of Potential Returns Country Risk 47 42 64 72 61 43 60 74 70 30 27 78 74 42 81 Risks 59 63 52 74 67 35 63 65 70 37 39 63 68 44 54 Upstream Rating 73 70 56 56 53 53 51 46 46 46 46 46 45 44 41 Rank 1 2 3= 3= 5= 5= 7 8= 8= 8= 8= 8= 13 14 15 Industry Risks 65 75 45 75 70 30 65 60 70 40 45 55 65 45 40 Source: BMI.Russia Oil and Gas Competitive Intelligence Report 2010 Upstream Scores Kazakhstan and Slovenia are the best and worst performers in this segment. Turkmenistan's hydrocarbons resources mean it has shifted further from the foot of the table. It comprises two sub-ratings 'Limits of Potential Returns' and 'Risks to Realisation of Returns'. please consult the appendix. Scores are out of 100 for all categories. which have a 70% and 30% weighting respectively. showing that the overall pecking order is somewhat different from that for combined scores. Azerbaijan is second. the 'Limits' Rating comprises Power Sector and Country Structure. The Upstream BE Rating is the principal rating. The ratings structure is aligned across the 14 Industries for which BMI provides Business Environment Ratings methodology. which is based on BMI's proprietary Country Risk Ratings. with the choice depending on their exposure to the industry in each particular state. They are based upon the oil and gas resource base/growth outlook and sector maturity (Upstream) and the broader industry competitive environment (Country). with 100 the highest. which have a 75% and 25% weighting respectively. Bulgaria and Poland are tied in third place. Ukraine has the potential to challenge Slovakia for 13th place. itself having a very useful 14-point lead over Bulgaria. In turn.

Its oil and gas reserves account for much of the upstream score. Country Risks: Russia's broader country risk environment is unexceptional and ranked 11th behind Kazakhstan. privatisation and country risk factors are less impressive. while corruption is a key risk for private companies.Overview Russia has a share of fifth place with Turkey in BMI's updated Upstream Business Environment Ratings. Russia Upstream Rating -. This reflects the highest-placed oil and gas reserves. The best. behind even Turkmenistan. aided by unrivalled hydrocarbons resources. score is for long-term policy continuity. their ability to operate is weakened by the country's rule of law. and only respectable. Country Structure: Influencing Russia's fourth-highest position in the Limits to Potential Returns section is its unenviable country structure. The state has greater ownership of upstream assets than elsewhere in the region -. Its last position for Industry Risks is attributable to a poor licensing environment. which takes last place.Risks To Potential Returns Industry Risks: Russia is ranked last. but licensing. © Business Monitor International Ltd Page 81 . Furthermore.Potential Returns Upstream Market: On the basis of upstream data alone. and limited near-term privatisation prospects. although the major Caspian states are likely to remain out of reach. alongside Turkmenistan.Russia Oil and Gas Competitive Intelligence Report 2010 Russia Upstream Rating -. Medium-term scope exists for Russia to challenge Bulgaria and Poland above it. fifthranked oil production growth outlook and gas reserves to production ratio (RPR). Physical infrastructure barely matches the regional average. in the Risks to Realisation of Potential Returns section of our ratings. Russia Upstream Rating -. Russia is the joint second most attractive state in the CEE region.and the industry features relatively few non-state concerns. behind even Uzbekistan.

which have a 75% and 25% weighting respectively. the 'Limits' Rating comprises Power Sector and Country Structure. Kazakhstan. © Business Monitor International Ltd Page 82 . For a list of the data/indicators used. with the choice depending on their exposure to the industry in each particular state. Turkmenistan is now on the same score as Slovenia and there is little to choose between Croatia. In turn. The ratings structure is aligned across the 14 Industries for with BMI provides Business Environment Ratings methodology. Table: Regional Downstream Business Environment Rating Limits of Potential Returns Downstrea m Market Russia Turkey Poland Ukraine Czech Republic Kazakhstan Romania Azerbaijan Hungary Turkmenistan Slovenia Croatia Slovakia Uzbekistan Bulgaria 71 49 40 57 33 67 47 61 32 51 26 36 24 41 23 Country Structure 72 74 80 60 56 46 56 50 44 26 38 38 40 34 42 Limits 71 55 50 58 39 62 49 58 35 45 29 36 28 39 28 Risks to the Realisation of Potential Returns Country Risk 54 51 61 45 62 50 48 59 62 48 70 54 58 53 48 Risks 34 69 75 57 85 32 61 39 82 43 79 60 74 45 55 Downstrea m Rating 60 59 58 57 53 53 53 52 49 44 44 43 42 41 36 Rank 1 2 3 4 5= 5= 5= 8 9 10= 10= 12 13 14 15 Industry Risks 20 80 85 65 100 20 70 25 95 40 85 65 85 40 60 Source: BMI. with Russia now challenged by second-placed Turkey. but is unlikely to challenge it during the next few quarters. They are based upon the downstream refining capacity/product growth outlook/import dependence (Downstream) and the broader socio-demographic and economic context (Country).Russia Oil and Gas Competitive Intelligence Report 2010 Downstream Scores Russia and Bulgaria now bracket the 13 other CEE states in the downstream rankings. please consult the appendix. and is designed to enable clients to consider each rating individually or as a composite. Ukraine is now just one point behind Poland. in spite of the size of its fuels market and refining capacity. The Downstream BE Rating is the principal rating. It comprises two sub-ratings 'Limits of Potential Returns' and 'Risks to Realisation of Returns'. the Czech Republic and Romania are squabbling over fifth place. which have a 70% and 30% weighting respectively. with 100 the highest. having edged ahead of Azerbaijan. Turkey's risk profile is substantially better and it may be able to challenge for regional leadership over the medium term. Poland is just a point further back and also a potential regional leader. which is based on BMI's proprietary Country Risk Ratings. The 'Risks' rating comprises Market Risks and Country Risk. Slovakia and Uzbekistan near the foot of the table. which have a 60% and 40% weighting respectively and are based on a subjective evaluation of regulation and liberalisation (Market) and the industry's broader Country Risk exposure (Country). Scores are out of 100 for all categories.

Its joint lowest score with Kazakhstan for Industry Risks reflects the harsh regulatory regime and stagnant privatisation trend. There is still considerable state ownership of downstream assets. population and nominal GDP. © Business Monitor International Ltd Page 83 . Growth in GDP per capita is the second-highest for the entire region. short-term economic growth risk and short-term policy continuity.Overview Russia is at the top of the league table in BMI's updated Downstream Business Environment Ratings. Russia is ranked second from last.Russia Oil and Gas Competitive Intelligence Report 2010 Russia Downstream Rating -. and the downstream industry is only moderately competitive. behind Turkey. Russia Downstream Rating -. and its Country Structure has third place in the region. and third-ranked refining capacity growth potential. ahead only of Kazakhstan. There are excellent scores for refining capacity. The scores for rule of law and legal framework let the country down badly. oil and gas demand. There are a few particularly high scores.Potential Returns Downstream Market: On the basis of downstream data alone.Risks To Potential Returns Industry Risks: In the Risks to Realisation of Potential Returns section of our ratings. Country Risks: Its broader country risk environment is ranked equal seventh alongside Croatia. Country Structure: Russia ranks first in terms of the Limits to Potential Returns section. This is attributable to the country's first-placed refining capacity and oil/gas demand. but there is some risk from Turkey over the longer term. ahead comfortably of Turkey and Poland. Russia Downstream Rating -. above Kazakhstan. and it fares little better in terms of physical infrastructure. Operational risks for private companies are reduced by the state's high scores for short-term economic external risk. Russia ranks first among the region's 15 countries. Population and nominal GDP rank first.

inDustry clAssificAtion Electronics/Electrical Manufacturing Oil & Gas Energy/Utilities Electric Distribution/Transport/Transmission Power Generation nAtionAlity/trADe AfiliAtion Finance Controller: Mr Ronald Pinto Country Manager: Mr Brent Robert Davies Business Development Manager: Mr Ryan Elder locAl stAtistics Established: n/a Business Activity BJ Services Company (Russia) provides pumping services to oil and gas firms. Almaty and Ashkhabad. USA BJ services company M. insurance.alfagroup. with interests in the oil and gas.ru Key presonnel Argus ltd 9 Skakovaya Street. inDustry clAssificAtion Established: 1993 Business Activity Argus Limited (Russia) supplies pipeline construction equipment and electronics repair equipment.bjservices.com Website: www. retail trade and telecommunications sectors.com Key presonnel CIO: Mr Pavel Pestrikkov Group Portfolio Management & Control Director: Mr Vladimir Ashurkov Finance.ru Website: www. commercial and investment banking. Baku.com Key presonnel Consultancy Telecoms/Communications Banking/Finance Oil & Gas Aviation/Defence nAtionAlity/trADe AfiliAtion USA Subsidiary of AT Kearney Inc. USA © Business Monitor International Ltd Page 84 . Ukraine and other CIS countries.com Key presonnel President . Corporate Development & Control Director: Mr Nigel Robinson Corporate Relations Manager: Ms Natalia Dymova General Management locAl stAtistics Established: 1989 President: Mr Michael Rae Vice President: Mr Dmitry Kanevskey General Director: Mr Anton Rae Operations Director: Mr David Lax Commercial & Marketing Director: Mr Vlad Kurbatov Head of Sales: Mr Konstantin Lyubimov locAl stAtistics Business Activity Alfa Group Consortium (Russia) is one of the country’s largest privately owned financial-industrial conglomerates. inDustry clAssificAtion Services Oil & Gas France Subsidiary of Alstom.ru Website: www.Finance: Mr Dmitry Markov Corporation Director: Mr Sergey Bakov locAl stAtistics Established: n/a Oil & Gas Energy/Utilities Russia Managing Director: Mr Ruslan Korzh General Manager: Mr Alla Khaitova Head of Technical: Mr Dmitry Klur Pavlov Finance Manager: Mr Vladimir Berezhnov Marketing Manager: Miss Irna Kuzminykh locAl stAtistics inDustry clAssificAtion Established: 1992 nAtionAlity/trADe AfiliAtion Business Activity AT Kearney (Russia) provides strategic consulting services in Russia.Tirogovskaya Street House 18.ga.alstom.ru Website: www. Building 1. inDustry clAssificAtion Alstom 18 Schipok Street Building 2 Moscow 115093 Russia Tel: +7 (495) 231 2949 Fax: +7 (495) 231 2945 Email: info@power. 52/1 Riverside Towers Moscow 115054 Russia Tel: +7 (495) 258 5019 Fax: +7 (495) 258 5016 Email: info@atkearney. 4/F Moscow 125040 Russia Tel: +7 (495) 741 4817 Fax: +7 (495) 741 4818 Email: argcis@arguslimited.Russia Oil & Gas Competitive Intelligence Report 2010 Business Development Directory Alfa Group 11 Bolshoyk Savinskiy Office 351 Moscow 119435 Russia Tel: +7 (495) 787 0077 Fax: +7 (495) 792 5235 Email: info@ctf.ru Key presonnel At Kearney Kosmodamianskaya Naberezhnaya.alstom.atkearney. France nAtionAlity/trADe AfiliAtion USA Subsidiary of BJ Services Company USA. commodities trading.com Website: www. inDustry clAssificAtion Oil & Gas Banking/Finance Telecoms/Communications Insurance Russia Machinery/Equipment Construction/Engineering Oil & Gas nAtionAlity/trADe AfiliAtion nAtionAlity/trADe AfiliAtion USA Representative Office for Argus Limited USA.ru Key presonnel President: Mr Musa Bazhaev Vice President: Mr Igor Sarajev Vice President . 4/F. Office 403 Moscow 119435 Russia Tel: +7 (495) 937 9828 Fax: +7 (495) 933 3635 Website: www.Russia: Mr Patrick Tascal Finance Director: Mr Vincent Lery Administration Officer: Mrs Galina Nikitina Head of Information Technology: Mr Victor Nikitiuk Human Resources Manager: Ms Larisa Sukhorukikh locAl stAtistics Established: 1980 Business Activity Alstom (Russia) has manufacturing facilities in Moscow and specialises in design and engineering of gas turbines and their components as well as in the full-cycle production of gas turbine blades and other components. The company also has representative offices in Krasnodar. USA Alians Group 39 Sivtsev Vrajek Per Moscow 119002 Russia Tel: +7 (495) 745 5656 Fax: +7 (495) 745 5658 Email: ga@ga.arguslimited.

.com Key presonnel President: Mr Don Wallette Business Development Manager: Ms Mariana Barabanova Sales Manager: Mr Anton Mirov locAl stAtistics Established: 1992 Business Activity CEO: Mr Alexander Chudnovets Senior Management Finance Manager: Mr Aleksandr Gyzenko Head of Human Resources: Mrs Kate Tverdoxleb locAl stAtistics Established: n/a No of Employees: 50 Business Activity CETCO (Russia) represents a number of Western oilfield. In February 1999. The company’s clients have included regional and national companies. In December 1991. With a 15% equity stake. Industry Classification Oil & Gas Exploration/Extraction Machinery/Equipment nAtionAlity/trADe AfiliAtion Executive Director: Mr Konstantin Schilin Finance Director: Mr Craig Miller Office Manager: Mrs Ludmila Mokrousova General Management Marketing Manager: Mrs Anna Dubovskaya Human Resources Manager: Mrs Varvara Nesterova Head of Information Technology: Mr Vladimir Ivakh Business Development . Kharyaga and Yuzhno-Sakhalinsk. Tatneft.ru Website: www.com Key presonnel Italy Representative Office for Eni SpA. Noyabrsk. USA chevron lubricants cis 7 Gasheka Street Moscow 123056 Russia Tel: +7 (495) 544 5556 Fax: +7 (495) 544 5557 Website: www. LUKOIL. which established the Polar Lights Company.conocophillips. Gazprom and Eni signed an agreement for the joint participation in the Blue Stream Project. Gazflot. 4 dom 2 Moscow 127051 Russia Tel: +7 (495) 258 2700 Fax: +7 (495) 258 2727 Email: atsm@chevron. Russia. Nefteyugansk.eni. Chevron is the largest private shareholder in the CPC. development.com Website: www.Russia Oil & Gas Competitive Intelligence Report 2010 capital equipment and technology corp (cetco) Messengers lane. Nizhnevartovsk.chevron. Eni and Gazprom signed a 50/50 strategic alliance agreement for the exploration.halliburton. which was established in the early 1990s by the governments of the Russian Federation.ru Key presonnel Tel: +7 (495) 785 2800 Fax: +7 (495) 785 2804 Website: www. Rosshelf. redistributing 50% of CPC’s equity shares among several private international petroleum companies. The joint venture has also been studying a number of oil fields north of the Timan Pechora Province. USA Hydro Aluminium cis As PO Box 161 © Business Monitor International Ltd Page 85 . inDustry clAssificAtion Machinery/Equipment Oil & Gas Mining USA ConocoPhillips (Russia) carries out upstream operations and business development. Yukos and Sidanco. 5. In 1998. the governments of Russia and Kazakhstan signed the CPC Restructuring Agreement.it Key presonnel Sales Director: Mr Ian Bennett Finance Manager: Ms Elena Kotliar Head of Legal: Miss Galina Glazkova Human Resources Manager: Mrs Anastasia Kristova Supply Chain Manager: Miss Elena Kutareva locAl stAtistics Head of Representative Office: Mr Ernesto Ferlenghi locAl stAtistics Established: 1950 Business Activity Established: n/a Petrochemicals Oil & Gas Chemicals inDustry clAssificAtion nAtionAlity/trADe AfiliAtion USA Subsidiary of Chevron Corporation. Fortum (formerly Neste). Norsk Hydro (Norway) and Total (France). Halliburton International has offices in Moscow. Building 1 Moscow 119034 Russia Tel: +7 (495) 916 5353 Fax: +7 (495) 916 5351 Website: www.1 Moscow 105005 Russia Tel: +7 (495) 232 1002 Fax: +7 (495) 232 1003 Email: info@cetco. Italy Halliburton international Smolnaya ul. 18/F Moscow 125445 Russia Tel: +7 (495) 755 8300 Fax: +7 (495) 755 8301 Website: www. mining and airport equipment manufacturers. USA Halliburton (Russia) provides services to the oil and gas industries. Industry Classification Chemicals Petrochemicals Oil & Gas Exploration Manufacture Oil/Petroleum Exploration/Extraction Recycling/Treatment nAtionAlity/trADe AfiliAtion nAtionAlity/trADe AfiliAtion USA United Kingdom Subsidiary of ConocoPhillips. The pipeline has a capacity of approximately 16 billion cubic metres of gas per year. with a special focus on natural gas. a 400 kilometre gas pipeline from the Russian to Turkish coasts on the Black Sea and a compressor station in Dzubga. USA Eni SpA (Russia) specialises in the exploration and production of natural gas. d. Industry Classification Oil & Gas nAtionAlity/trADe AfiliAtion chevron neftegaz inc Rakhmanovsky Pereulok.Account Leader: Mrs Victoria Duneva Marketing locAl stAtistics Established: n/a No of Employees: 850 Business Activity USA Russia Subsidiary of Chevron Corporation. Surgutneftegas.. including Gazprom.com Key presonnel President & General Manager: Mr Darrell Cordry Marketing Manager: Ms Sabina Abudaeva locAl stAtistics Established: 1991 Business Activity Chevron Neftegaz Inc (Russia) is one of the largest investors in the Russian oil and gas infrastructure through its investment in the CPC. 24d Meridian Commercial Centre.cetco. is an international technology-based engineering and construction firm.com Key presonnel eni spA Levshinskij B per. Usinks. Halliburton KBR. transportation and sale of hydrocarbons. inDustry clAssificAtion conocophillips Gasheka Sreet 6 Office 1300 Moscow 125047 Russia Services Oil & Gas Trade nAtionAlity/trADe AfiliAtion USA Subsidiary of Halliburton Group of Companies. ConocoPhillips is also a participant in the Shtokman Gas Condensate field in partnership with Gazprom. In December 1996.chevronlubricants. ConocoPhillips and Arkhangelskgeoldobycha (AGD) signed a joint venture agreement. the Republic of Kazakhstan and the Sultanate of Oman. p. Its sister company.

com locAl stAtistics inuctan oy 4th Rostovskiy per. which accounts for 80% of the group’s sales.Russia Oil & Gas Competitive Intelligence Report 2010 Usachova Street 33 .ru Key presonnel President: Mr Valadimir Potanin CEO: Mr Sergey Barbashev Deputy CEO: Mr Guerman Aliev CFO: Mr Alexander Polevoy Managing Director: Mr Andrei Bougrov Managing Director .com Key presonnel General Director: Mr Igor Voronov locAl stAtistics Established: 2004 No of Employees: 22000 Business Activity Vice Chairman: Mr Valery Otchertsov President: Mr Igor Viktorovich Makarov General Management Vice President .5% stake in oil and gas exploration group RUSIA Petroleum. The ITERA group of companies comprises 130 companies engaged in the energy. Integra Group has become one of the leading companies in the oilfield services and equipment manufacturing sectors of the Russian market. 38 St Petersburg 199397 Russia Tel: +7 (812) 352 0743 Fax: +7 (812) 325 3757 Email: sar@intari. construction.intari.com locAl stAtistics inDustry clAssificAtion Oil & Gas Manufacturing Machinery/Equipment Russia nAtionAlity/trADe AfiliAtion Established: 1992 Business Activity interros 9 Bolshaya Yakimanka Street Moscow 119180 Russia Tel: +7 (495) 785 6363 Fax: +7 (495) 726 5754 Email: info@interros. 1.Investments: Mr Dmitry Kostoyev locAl stAtistics Established: n/a No of Employees: 190000 Business Activity Interros (Russia) is among the country’s largest private investment companies.ru Website: Key presonnel Chief Representative: Mr Nikita Nikonov locAl stAtistics Established: n/a Business Activity Established: n/a Intari (Russia) develops ice and marine technology. and a 27. media group Prof-Media News and Publishing Holding. operating a number of gas fields in the Yamalo-Nenetz Autonomous Region. d.com Website: www. Korpus 1. power machine producer Silovye Mashiny. © Business Monitor International Ltd Page 86 . development and production of oil and gas.ru Key presonnel iterA Group Sevastopolsky Prospekt.iksoil. Netherlands and Switzerland.iteragroup.ru Website: www. workover. the USA. the Interros-Dostoinstvo private pension fund.7 Moscow 119048 Russia Tel: +7 (495) 244 4406 Fax: +7 (495) 244 3251 Website: www. Established: 1992 No of Employees: 8000 Business Activity ITERA Group (Russia) produces. The company is also the largest independent gas producer in Russia.info@integra. Norway iks-oil ltd Strojenie 14.ru Website: www.. Baltic States.integragroup. Integra Group operates in the drilling. Office 7 Nabierezhnaya Dom 7 Dierbienievskaya Moscow 115114 Russia Tel: +7 (495) 234 5942 Fax: +7 (495) 234 5944 Email: info@x-oil. the CIS. metal. Street 2 Helsinki House Moscow 119121 Russia Tel: +7 (495) 937 3563 Fax: +7 (495) 248 1471 Email: inuctan@space.hydro. Investments include nickel and gold producer MMC Norilsk Nickel. seismic and geophysics sectors and manufactures oilfield services equipment.ru Website: www. chemicals and other sectors in Russia. private banking group Rosbank.Commercial: Mr Gennady Nikolaevich Skidanov Executive Vice President: Mrs Raissa Mikhailovna Frenkel General Director: Mr Vladimir Makeyev locAl stAtistics Integra Group is a leading Russian independent provider of onshore oilfield services and a leading manufacturer in Russian of drilling rigs with heavy lifting capacity. 28. oil and gas. transports and markets natural gas. the Soglasie insurance group. It has oilfield services operations in all major oil and gas producing regions in Russia and in many other CIS countries. in preparation for the extraction of oil and gas. The company manufactures primary aluminium and rolled products. The firm provides oil companies and their service stations with fuel sales solutions. agriculture and food processing venture APK Agros. inDustry clAssificAtion Machinery/Equipment Oil & Gas Russia Canada Oil & Gas Trade/Supply/Distribution Finland nAtionAlity/trADe AfiliAtion nAtionAlity/trADe AfiliAtion integra Group 6 Prospect Vernadskogo Moscow 119311 Russia Tel: +7 (495) 933 0621 Fax: +7 (495) 933 0622 Email: integra. cementing equipment and specialised equipment used in the exploration. inDustry clAssificAtion Business Activity Inuctan Oy (Russia) is a subsidiary of Autotank (Finland). Through 16 strategic acquisitions.interros. inDustry clAssificAtion Chemicals Petrochemicals Manufacturing Oil & Gas Agrochemicals nAtionAlity/trADe AfiliAtion Norway Subsidiary of Hydro Aluminium AS.ru Key presonnel Hydro Aluminium CIS AS (Russia) specialises in aluminium. Building 1 Building 1 Moscow 117209 Russia Tel: +7 (495) 411 8500 Fax: +7 (495) 411 8502 Email: inbox@itera. d.ru Website: www. United Kingdom intari Beringa ul. Products include integrated geographical systems Canadian company Enfotec for the exploration of the Arctic ocean. inDustry clAssificAtion Managing Director: Mr Alexander Zasypkin Sales Manager: Mr Alexander Kolesnikov locAl stAtistics Established: n/a Oil & Gas inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Oil & Gas Mining Banking/Finance Machinery/Equipment Insurance Media Russia nAtionAlity/trADe AfiliAtion Russia United Kingdom Distributor for BP plc. fertilisers.

ru Website: www.hu Key presonnel nAtionAlity/trADe AfiliAtion luKoil company 11 Sretensky Boulevard Moscow 101000 Russia Tel: +7 (495) 627 4444 Fax: +7 (612) 5535 8578 Email: webmaster@lukoil.com Key presonnel Established: n/a Oil & Gas Services USA inDustry clAssificAtion Finance Director: Mr Akira Oida Administration Director: Mr Nishigori Taku General Manager: Mr Nakavato Makoto Head of Chemicals: Mr Tsukui Manabu Head of Information Technology: Mr Vladimir Aimetinov Human Resources Manager: Mrs Ekaterina Mihesilova locAl stAtistics nAtionAlity/trADe AfiliAtion shell east europe company ltd ul Smolnaya. Office 1403-A 12 Krasnopresnenskaya Naberezhnaya Moscow 123610 Russia Tel: +7 (495) 778 4597 Fax: +7 (495) 778 9332 Email: moscow@rpi-inc. Belarus. Head of the Main Division of Oil and Gas Pro: Mr Vladimir Mulyak locAl stAtistics petroAlliance services company limited Narodnogo Opolcheniya ul d 40/3 Moscow 123298 Russia Tel: +7 (495) 797 9393 Fax: +7 (495) 797 9397 Email: pas@petroal.Russia Oil & Gas Competitive Intelligence Report 2010 inDustry clAssificAtion Chemicals Petrochemicals Oil & Gas Construction/Engineering Mining Russia Russia Tel: +7 (495) 967 6805 Fax: +7 (495) 967 6806 Email: info@rus. with smaller reserves in European Russia.com Website: www. 24 12/F. and information management and IT-related services to both Russian and international oil and gas operators. 7 Building 2 Sagovnichskaya Moscow 115035 Russia Tel: +7 (495) 961 2122 Fax: +7 (495) 961 2127 Website: www. integrated project management.és Gázipari Nyrt. Azerbaijan. The company recently carried out a feasibility study on the reduction of carbon-dioxide emissions at the Konakovo Power Station.ru Key presonnel Established: 1993 No of Employees: 150000 Business Activity LUKOIL Oil Company (Russia) holds over 19.3 bn barrels of oil equivalent in proven reserves. The bulk of the company’s exploration and production assets are located in Western Siberia. Netherlands © Business Monitor International Ltd Page 87 . Romania. 52 Moscow 115054 Oil & Gas Chemicals LPG Lubes Petrochemicals nAtionAlity/trADe AfiliAtion Netherlands United Kingdom Subsidiary of Royal Dutch Shell plc. Economics & Planning: Mr Sergei Kukura Finance First Vice President . and retail networks in the US. inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Japan Subsidiary of Mitsubishi Corporation.mol. Bulgaria. Kazakhstan and Kyrgyzstan. pumping. 9/F Kosmodamianskaya Naberezhnaya. the third largest private oil company in the world in terms of reserves.com Key presonnel General Manager: Mr Gabor Gyulai Office Manager: Ms Maria Tatarnikova Finance Manager: Ms Laura Babaeva Head of Human Resources: Miss Anna Belyaeva Head of Information Technology: Mr Eugene Prokoshev locAl stAtistics Established: n/a Oil & Gas inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Hungary Subsidiary of MOL Magyar Olaj. wireline logging and perforating. Estonia.hu Website: www.shell. Head of the Main Technical Division: Mr Dzhevan Cheloyants Vice-President. Hungary President: Mr Vagit Alekperov General Management First Vice President . Turkey. Internationally the company has refining assets in the Ukraine. USA russian petroleum investor (rpi) Entrance 3.rpi-inc. Poland. Timan Pechora and the North Caspian regions. and Bulgaria. Head of the Main Division of General Affairs: Mr Anatoly Barkov Vice-President.com Key presonnel Established: 1968 Business Activity Mitsubishi Corporation (Russia) provides services to the energy sector.lukoil.mol. inDustry clAssificAtion Finance Director: Miss Marina Solovyeva Human Resources Manager: Mrs Anna Ermilova Chief Accountant: Mrs Irina Dorina Head of Information Technology: Mr Arkady Kochurov locAl stAtistics Established: 1995 Business Activity PetroAlliance Services Company Limited (Russia) provides seismic. Latvia. Lithuania. The company is also developing sources of liquefied natural gas in Russia. Head of Strategic Development & Investment Analysis: Mr Leonid Fedun Vice-President. Ukraine. inDustry clAssificAtion Manufacturing Oil & Gas Natural Gas Oil/Petroleum Distribution/Transport/Transmission Exploration/Extraction Refining/Processing Suppliers nAtionAlity/trADe AfiliAtion Oil & Gas Machinery/Equipment nAtionAlity/trADe AfiliAtion Russia Affiliated with Schlumberger Ltd.Refining. inDustry clAssificAtion General Manager: Mr Yacek Dziembaj locAl stAtistics Energy/Utilities Services Oil & Gas Chemicals Petrochemicals Established: n/a Business Activity Shell East Europe Company Ltd (Russia) sells oil products and chemicals. Mitsubishi has offices in Moscow and Yuzhno-Sakhalinsk. This was in co-operation with The Kansai Electric Power Inc (Japan). Head of the Main Division of Supplies and Sa: Mr Valery Subbotin VP.mitsubishicorp.com locAl stAtistics Russia Mitsubishi corporation Avrora Business park 4/F. Moldova.petroal. directional drilling. located in a Moscow suburb. Japan Mol-russ Bulding 3.com Website: www. Marketing & Distribution: Mr Vladimir Nekrasov Vice-President. Romania.Human Resources: Mr Anatoly Moskalenko First Vice President . Meridian Business Center Moscow 125445 Russia Tel: +7 (495) 258 6900 Fax: +7 (501) 258 6920 Website: www.Exploration & Production: Mr Ravil Maganov General Management Head of Main Division .Finance.

Paveletskaya Square Moscow 115054 Russia Tel: +7 (495) 967 3818 Fax: +7 (495) 967 3824 Website: www.com Key presonnel surgutneftegas Kukuevitskogo ul. In the longer term. which are owned and operated by Statoil Nefto.com Website: www. d.ru Website: www. Subsidiary of Statoil ASA (Norway). Shell Global Solutions is also based at the above Moscow office and provides a consultancy service to corporate clients.ru Website: www.Strategy & New Business Development: Mr Stanislav Miroshnik General Management Vice President .com Website: www.surgutneftegas.com Key presonnel Statoil (Russia) specialises in oil and gas exploration and production. located in the Republic of Tatarstan and produces around 8% of Russia’s total crude output.technosol. Industry Classification Oil & Gas nAtionAlity/trADe AfiliAtion Russia Oil & Gas Exploration Manufacture Exploration/Extraction Recycling/Treatment Refining/Processing Services tatneft Jsc 75. The company has 5.5bn barrels of proved oil reserves. 6/F Moscow 123242 Russia Tel: +7 (495) 790 7840 Fax: +7 (495) 790 7831 Email: information@sibirenergy.sibirenergy. producing approximately 13% of the country’s total output.shell. such as motor fuels and lubricants.tatneft.Technology: Mr Francis Sommer Acting Managing Director: Mr Mihail Fridman Executive Director: Mr Herman Han Executive Director: Mr Victor Vekselberg Operations Director: Mr Bill Schreider Finance Director: Mr Jonathan Miuir Business Assurance Director: Mr Anatoly Temkin © Business Monitor International Ltd Page 88 . but also has interests in related products.tnk-bp. the company hopes to have ten service stations on the Kola peninsula in north-western Russia.statoilhydro.ru locAl stAtistics Governmental Affiairs Director: Mr Alexander Levshov Senior Management Business Development Manager: Mr Evgeny Borisov Finance Manager: Mr Michal Kolodziejczyk Asset Manager: Mr Per Kjaernes Head of Industrial Relations: Mr Benedikt Henriksen Head of Operations: Mr Bjorn Ingar Tollefsen Exploration Manager: Mr John K Milne Public Affairs Manager: Mrs Natalia Krasilnikova Human Resources Director: Mr Aslak Sviland locAl stAtistics Established: n/a Oil & Gas inDustry clAssificAtion nAtionAlity/trADe AfiliAtion Russia United Kingdom Distributor for BP plc. inDustry clAssificAtion Oil & Gas Transport Natural Gas Oil/Petroleum Exploration/Extraction Refining/Processing nAtionAlity/trADe AfiliAtion Norway Subsidiary of Statoil-Den Norske Stats Oljeselskap AS. The company has five service stations in the Murmansk region. inDustry clAssificAtion Oil & Gas nAtionAlity/trADe AfiliAtion United Kingdom Subsidiary of Sibir Energy plc. 1 Surgut Tyumen 628400 Russia Tel: +7 (346) 242 6133 Fax: +7 (346) 242 6494 Email: secret_b@surgutneftegas.Russia Oil & Gas Competitive Intelligence Report 2010 shell exploration & production services (rf) Bv Novinsky Boulevard 31 Moscow 123242 Russia Tel: +7 (495) 792 3550 Fax: +7 (495) 792 3553 Email: customersupport@shell. Norway Vice President .com locAl stAtistics CEO: Mr Shafagat Fakhrazovich Takhautdinov Deputy General Director: Mr Vladimir Pavlovich Lavushchenko General Management Deputy General Director & Chief Geologist: Mr Rais Salikhovich Khisamov General Management First Deputy General Director & Head of Crude & Oil Products: Mr Nail Ulfatovich Maganov First Deputy General Director .com Website: www. Block 2.ru Website: www. Lenin Street Almetyevsk Tatarstan 423450 Russia Tel: +7 (855) 337 1111 Fax: +7 (8553) 376 151 Email: tnr@tatneft. United Kingdom Oil & Gas Oil/Petroleum Exploration/Extraction Russia nAtionAlity/trADe AfiliAtion statoil russia 2.ru Key presonnel nAtionAlity/trADe AfiliAtion Netherlands United Kingdom Subsidiary of Royal Dutch Shell plc.Production: Mr Nail Gabdulbarievich Ibraghimov Finance Director: Mr Evgeny Tikhturov locAl stAtistics Established: n/a Established: 1950 No of Employees: 74858 Business Activity Business Activity Sibir Energy plc (Russia) is an independent oil and gas production company with a pure Russian focus as 100% of its reserves and crude oil production comes from the oil-rich Khanty Mansiysk Region in Western Siberia. inDustry clAssificAtion Tatneft JSC (Russia) is active in the upstream and downstream sectors of the oil and gas industry. Netherlands sibir energy plc 31 Novinsky Boulevard.ru locAl stAtistics General Director: Mr Christopher Finlayson General Management Public Affairs Manager: Mr Maxim Shoob General Management locAl stAtistics Established: 1993 Established: n/a Business Activity Business Activity Shell Exploration & Production Services (RF) BV (Russia) explores and produces hydrocarbon resources and associated infrastructure and pipeline projects.com Key presonnel technological solution Naberezhnaya Obvodnogo Canala 14 Sankt-Peterburg St Petersburg 192019 Russia Tel: +7 (812) 365 4406 Fax: +7 (812) 365 4407 Email: infost@quantum. inDustry clAssificAtion Surgutneftegas (Russia) is the country’s third largest upstream oil producer. United Kingdom Established: 1991 No of Employees: 30 Business Activity tnK-Bp 1 Arbat Street Moscow 119019 Russia Tel: +7 (495) 777 7707 Fax: +7 (495) 777 7708 Email: company@tnk-bp.

com Key presonnel Established: 1994 Business Activity Wintershall Holding AG (Russia) is involved in oil and gas exploration and production.wintershall.com Website: www.000 km of transportation pipes (or 80% of the total) nationwide. Gazprom controls over 200 regional gas distributors serving over 430.2 million kW aggregate power.total. The new 50:50 joint venture. Russia Joint venture with BP plc. 9/1/1 Armiansky Pereulok Moscow 101990 Russia Tel: +7 (495) 748 6500 Fax: +7 (495) 748 6505 Email: nestro@nestro.nestro. is over 153.ru Website: www. USG.Russia Oil & Gas Competitive Intelligence Report 2010 locAl stAtistics Established: 2003 No of Employees: 113000 Business Activity Wintershall Holding AG ul Namjotkina 16. which is the country’s first onshore production-sharing project.000 cities and rural communities across Russia. TNK-BP is the country’s third and the world’s tenth largest private sector producer of oil and gas. Total operates the Kharyaga project in Russia’s northern TimanPechora province.35bn merger of their Russian businesses. supplying natural gas to 80. France Chairman: Mr Sergey Shmatko General Director: Mr Nikolay Brunich Marketing Manager: Mr Alexey Hodakov locAl stAtistics uGs World Trade Center Krasnopresnenskaja Naberezhnaya 12 Office 507 Moscow 123610 Russia Tel: +7 (495) 967 0774 Fax: +7 (495) 967 0775 Website: www. Germany Established: 1989 Business Activity Total Moscow (Russia) is involved in the exploration and production of oil and chemical products.300 km long. inDustry clAssificAtion Oil & Gas Russia nAtionAlity/trADe AfiliAtion © Business Monitor International Ltd Page 89 . The Kharyaga project is being developed jointly by Total (50%). after they agreed to a US$6. has 263 compressor stations along the way and gas-compressor units with 44. Norway’s Norsk Hydro (40%) and the local Nenetsk Oil Co (10%). covering all stages from exploration to facilitation of oil fields on land and offshore.com locAl stAtistics Established: 1967 No of Employees: 260 Business Activity Zarubezhneft (Russia) is the leading foreign economic enterprise in the oil and gas industry in the country. the owners of TNK. The group companies Elf Lubricants Russia and Bostik Findley Russia are also represented in Russia. Hotel-Complex Office 706 Moscow 117997 Russia Tel: +7 (495) 719 8689 Fax: +7 (495) 719 8689 Email: info@wintershall. Industry Classification Oil & Gas nAtionAlity/trADe AfiliAtion Russia Established: n/a Business Activity The mainline gas pipes forming Russia’s Unified Gas Transportation System (UGS) are owned by Gazprom.ugs. The priority fields of activities lie in the development and implementation of complex oil and gas programmes and projects abroad.ru Key presonnel Petrochemicals Oil & Gas Chemicals nAtionAlity/trADe AfiliAtion France Subsidiary of Total SA. the largest gas transportation system in the world. inDustry clAssificAtion Oil & Gas nAtionAlity/trADe AfiliAtion Russia USA Joint venture with Alfa Group. 1st Tverskaya Yamskaya Street Moscow 125047 Russia Tel: +7 (495) 228 6200 Fax: +7 (495) 228 6201 Website: www. United Kingdom President: Mr Reinier Zele Head of Representative Office: Mr Jurgen Moepert HR Manager: Mrs Oksana Golovchenko locAl stAtistics total Moscow 21. inDustry clAssificAtion Oil & Gas Natural Gas Oil/Petroleum Refining/Processing Trade nAtionAlity/trADe AfiliAtion General Director: Mr Pierre Nerguararian locAl stAtistics Germany Representative Office for Wintershall AG. inDustry clAssificAtion Zarubezhneft Joint stock company Building 1.de Key presonnel TNK-BP (Russia) was formed by UK-based oil major BP and the Russian financial companies Alfa Group and Access-Renova (AAR).

Sign up to vote on this title
UsefulNot useful